Consumer sentiment improves, inventories drop
Improving U.S. consumer sentiment and a big drawdown in wholesale inventories on Friday built on recent evidence that an economic recovery was picking up speed.
Shipping firm FedEx Corp added to the growing sense of economic recovery when it said profits would be higher than it had earlier expected, citing an improving economy and fuel prices.
Evidence of a durable recovery is coming in from all quarters with economic data, company earnings and big drivers of global growth like China all signaling strength ahead. Concerns about a frail jobs market continue to temper optimism about the U.S. recovery, however.
“We are in a recovery, but it is a weak recovery because the consumer is still very strained on the income side,” said Kurt Karl, head of economic research at Swiss Re in New York.
Chicago Federal Reserve president Charles Evans on Friday said the United States was “tentatively” emerging from a severe recession.
The Reuters/University of Michigan Surveys of Consumers said the preliminary reading of its consumer confidence index for September rose to 70.2, the highest since June, from 65.7 in August. This was above economists’ median expectation of a reading of 67.3, according to a Reuters poll.
Sentiment is believed to correlate closely with consumer spending, and consumers may be tentatively loosening their purse strings in response.
“Things look like they’re looking up, but our habits have changed permanently in many ways,” said Ridie Ghezzie, a librarian at Dartmouth College in Hanover, New Hampshire, while browsing in the furniture section at Macy’s department store in New York free credit score online.
“During the year when things were really bad, we really stopped everything, and we’ve changed our lifestyle in ways I’ve almost forgotten about now — we don’t go out to dinners much anymore,” Ghezzie said.
INVENTORIES FALL
Inventories at U.S. wholesalers in July fell to their lowest in nearly three years, declining for the 11th month after sharp drops in furniture and metals stocks, government data showed, suggesting consumer demand was reviving.
The Commerce Department said total wholesale inventories dropped 1.4 percent to $387.2 billion, the lowest level since September 2006, after a revised 2.1 percent decline in June. Economists had expected a 1.0 percent drop in July from June.
The data helped to give Wall Street stocks a brief boost, but shares later edged lower as crude oil prices fell. U.S. Treasury bonds, seen as a safe-haven investment in times of economic uncertainty, shrugged off the data to trade higher.
U.S. import prices jumped 2.0 percent in August as the cost of oil rose, the U.S. Labor Department said. The increase, twice what analysts had expected, was the fifth rise in the last six months. It followed a July drop of 0.7 percent.
Excluding petroleum, import prices increased a much milder 0.4 percent in August after falling 0.3 percent in July.
Filed under: term by Wolf