US consumer sentiment perks up while trade gap widens
NEW YORK — Consumer sentiment hit an eight-month high in early January as Americans grew more optimistic about job prospects, a survey released on Friday showed.
Separate data released earlier showed the US trade deficit widened in November to its largest in five months, prompting some economists to slightly rein in growth expectations for the fourth quarter.
The Thomson Reuters/ University of Michigan preliminary January reading on its overall index of consumer sentiment rose to 74.0 from 69.9 in December for the fifth month of gains and the highest level since May 2011.
The report topped expectations of 71.5 and was in contrast to December's weaker-than-expected retail sales reported on Thursday.
"This shows even though the retail sales number this week was disappointing there could be a little more underlying strength," said Kathy Lien, director of research at GFT Forex in Jersey City.
"I'd be wary of looking at this as a shift in long-term confidence, but I'd look at this as good news today."
While the gain brought the index close to 2011's high point, it is still well off the strength seen before the financial crisis.
The day's data was eclipsed in financial markets, however, by reports that Standard & Poor's was set to downgrade the ratings on several euro zone countries. Wall Street was down about 1 per cent in midday trade.
US Commerce Department data showed the trade gap totaled $47.8 billion in November, exceeding analysts' fore- cast of a $45.0 billion deficit.
"The trade balance deteriorated pretty significantly and it could shave a few tenths of a per cent off our expectation for fourth quarter (growth)," said Russell Price, senior economist at Ameriprise Financial.
Jpmorgan said gross domestic product growth for the fourth quarter was now tracking closer to 3.0 per cent than their forecast of 3.5 per cent.
A wider deficit shows that more goods and services bought by US businesses and consumers were produced outside the country, subtracting from gross domestic product.
"The external outlook does not bode well for US exports, as a deceleration in global growth will coincide with a stronger US dollar due to lingering financial concerns regarding Europe's sovereign debt turbulences," wrote Martin Schwerdtfeger, senior economist at TD Bank Group, in a note.
Separately, a dip in import prices showed inflation pres- sures were still muted, giving the Federal Reserve wiggle room as it holds US benchmark interest rates at ultralow levels.import prices were down 0.1 per cent in December after a 0.8 per cent gain in November as oil prices fell, in line with economists' expectations. Economic growth in the final quarter of 2011 is likely to have accelerated from the third quarter's 1.8 per cent rate, with many economists expecting an annualised rise of around 3 per cent.jpmorgan Chase & Co Chief Executive Jamie Dimon sounded a positive note on the economy on Friday, saying the United States' recovery was strengthening, though he expressed concern over the European debt crisis.
Consumer spending, once a key pillar of the US economy, remains lackluster and sensitive to shocks.
Although some Federal Reserve officials have said taking further steps to juice the economy may be needed, no action is expected at the next Fed policy meeting at the end of the month.
Thirty-four per cent of consumers polled in the confidence survey said they had heard of recent job gains, a record high in the survey's history and well above December's 21 per cent.
"The data suggest a stronger consumer spending outlook, rising to about a 2.1 per cent gain in 2012," survey director Richard Curtin said in a statement.
But consumers still lacked confidence in government economic policies with the majority rating them unfavourably for the sixth month in a row.
Americans also remained dour on their personal finances with just 24 per cent expecting their finances to improve in January, slightly below 25 per cent last month.
The survey's barometer of current economic conditions rose to the highest since February at 82.6 from 79.6 while its gauge of consumer expectations gained to 68.4 from 63.6.— Reuters