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Lower personal debt aids outlook

A lesser-known survey of consumer sentiment finds Americans with a slightly better view of the economy.

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By Jeffry Bartash
MarketWatch
Published:
WASHINGTON -- A survey of consumers about their financial security and view of the U.S. economy improved slightly in August, mainly because Americans made headway in cutting their debt, according to a report issued Friday.
The University of Michigan-Thomson Reuters' second and final reading of consumer sentiment in August rose to 74.3, somewhat better than the initial estimate of 73.6.
Economists surveyed by MarketWatch had expected the index to edge up to 73.8 from 72.3 in July.
The sentiment survey painted a somewhat different picture of consumer attitudes than another index released earlier this week. The better-known consumer-confidence index, produced by the Conference Board, showed a marked deterioration in the attitude of Americans in August.
The consumer-confidence index dropped to 60.6 from 65.4, marking the lowest level since November. That index was released Tuesday.
Although the two indexes tend to track together over time, they sometimes diverge in the short term because they take different approaches to measuring the attitudes of Americans.
The sentiment gauge asks consumers about their own financial situation and near-term plans to purchase a variety of goods or services.
The confidence index, arguably more an indicator of future intentions, asks broader questions about how consumers feel about the economy.
In any case, neither index is particularly high, a reflection of the anxiety most Americans feel.
In August, the sentiment survey rose because Americans felt more financially secure after reducing their debts. The current conditions index climbed to 88.7 in August from 82.7 in the prior month.
Yet consumers saw little reason to expect their incomes to grow much in the next year. The more pessimistic outlook was reflected in the part of the sentiment survey that measures future expectations. That gauge dipped to 65.1 from 65.6 in July.
What's more, there's little reason to expect consumers to become more confident in the near future. The U.S. has slowed since late spring amid persistently high unemployment, while a political stalemate in Washington could hurt the economy next year if deep spending cuts and tax increases take place as scheduled.
These concerns are weighing on the minds of consumers.
"This uncertainty will increasingly cause consumers to become more cautious spenders," said Richard Curtin, chief economist of the sentiment survey.
In a separate reports Friday, U.S. factory orders rose 2.8 percent in July while a survey of manufacturers in the Chicago region showed that business activity continued to increase at a moderate pace.
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©2012 MarketWatch
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Story tags » Personal Finance

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