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July consumer confidence takes sharp dive

By Sonja Ryst

U.S. consumers are increasingly worried about their current job and earnings prospects, and they're more pessimistic about the future than they have been in more than a year.

Thomson Reuters/University of Michigan said in a report Friday that its final July index of consumer sentiment sank to 67.8 in July from 76 last month. On a brighter note, consumer sentiment is still 2.7 percent higher this year than it was in July 2009.

Consumer spending accounts for more than two-thirds of the economy and is key to America's recovery. But people continue struggling in a tough job market where unemployment remains near 10 percent. Worries about an expected slowdown aren't helping.

Richard T. Curtin, director of the Thomson Reuters/University of Michigan Surveys of Consumers, said in a statement that people aren't itching to resume old spending habits. Instead, they're more likely to further cut back on debt and increase their saving as they worry about job and income prospects.

"The current slowdown in spending is likely to persist well into 2011," Curtin said in the statement. "While a double-dip [recession] is still unlikely, it now has a non-ignorable 25 percent probability."

Consumers are bracing themselves. The consumer confidence expectations index -- a measure of what people think the economy will be like six months from now -- declined by 10.7 percent in July to 62.3, falling to the lowest level since March 2009. That's down 1.4 percent from a year ago.

"People aren't in the mood to spend when unemployment remains at such high levels," explained Peter Cardillo, chief economist at Avalon Partners. He pointed out that the unemployment rate has had gradual improvement over the past several months, and layoffs seem to have stopped. He thinks the unemployment rate will remain high in the coming months, but will gradually improve.

"The bad news is that it's still difficult to find a job," he added. "We'll continue to see weak
consumer spending until we see a better improvement in the unemployment numbers."

By Sonja Ryst  |  July 30, 2010; 3:18 PM ET
Categories:  U.S. Economy  
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Obama needs to get cracking on the infrastruce and produce some working jobs NOW!

Posted by: Anonymous | July 30, 2010 5:16 PM | Report abuse

This is so frustrating. Consumers lack confidence because of high unemployment.

Businesses are making hefty profits but refuse to hire and reduce unemployment because consumers lack confidence and won't start spending.

What is this? A game of chicken? See who breaks first?

This is a business/consumer issue, not an Obama issue. The government has done a lot - remember the Stimulus? - but government-created jobs add to the deficit. And nobody seems to want that.

Posted by: fhschecker1 | July 30, 2010 6:23 PM | Report abuse

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