MW: Consumer sentiment plunges at fastest rate ever
By Ruth Mantell, MarketWatch
WASHINGTON (MarketWatch) -- In the midst of global efforts to shore up markets and economies, U.S. consumer sentiment plunged in October, according to the University of Michigan/Reuters index released Friday.
In a record single-month drop, the index fell to 57.5 in October, compared with a reading of 70.3 in late September. Economists surveyed by MarketWatch had been expecting an October result of 64.5.
"Clearly, this is the response to the market chaos, and it does not look good," wrote Ian Shepherdson, chief U.S. economist with High Frequency Economics.
It's unlikely that consumer confidence will reach levels consistent with rising spending until next year, Shepherdson added.
While inflation has eased recently -- gasoline prices have been falling -- it's no wonder that daily headlines on the credit crunch and the volatile stock market have taken a toll on consumer sentiment. The Dow Jones Industrial Average fell 21% during the first two weeks of this month.
The UMich expectations index declined to 56.7 from 67.2. And the current conditions index, which also experienced a record single-month drop, declined to an all-time low of 58.9 from 75.
Consumer expectations for inflation over the next 12 months rose to 4.5% from 4.3%. Expectations for annual inflation over five years decreased to 2.8% from 3%.
Also this week, the government reported that retail sales fell 1.2% in September, marking the worst drop in three years and the third monthly decline in a row -- a further sign that the nation's economy has sunk into a recession under the weight of an exhausted consumer. See full story.
And earlier this month, the government reported that the U.S. economy lost 159,000 jobs in September, the worst since March 2003. See full story.
Separately Friday, the Commerce Department reported that construction of new homes dwindled to the second-lowest level in 50 years last month, as home builders sought to reduce the number of unsold inventories in an elusive quest to find the bottom of the historic housing collapse.
