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Consumer sentiment eroded in September in the wake of Hurricane Katrina, according to researchers at the University of Michigan on Friday (Sept. 16).
CBS MarketWatch reported that the consumer sentiment index fell to 76.9 in September from 89.1 in August.
The number was below the consensus forecast of Wall Street economists, who had expected sentiment to slip to 85.1 in September.
Sentiment has fallen sharply over the past two months, as the price of gasoline has shot above $3 a gallon. Consumer sentiment was 96.5 in July.
“If these declines were part of the normal economic cycle we would now call for a recession in the U.S. But they aren’t; the index is responding to a shock, and we expect it quickly to rebound,” said Ian Shepherdon, chief U.S. economist at High Frequency Economics.
“After 9/11, the index made up all the ground lost, and more, by January ‘02. This seems as good a guide as any now, though in the meantime we expect a couple of very rough months for consumers’ spending,” he said.
Robert Brusca, chief economist at FAO Economics, said it would be a mistake to put aside the weakness as simply high oil prices.
“Oil is destructive to the consumer’s budget. We are just beginning to see how badly oil is ravaging activity and people’s sense of well-being,” Brusca said.
Both sub-components of the sentiment index fell sharply in September.
The expectations index had the biggest decline, falling to 63.6 points from 76.9 in August.
The current conditions index fell to 97.7 points in September from 108.2 in August.