Morale sours in US on job concerns | Shanghai Daily

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Morale sours in US on job concerns

UNITED States consumers' moods soured early this month on persistent worries about jobs, a survey showed last Friday, offering little hope their spending will help the sputtering economic recovery.

Another report showed domestic demand for foreign goods slumped in May, reflecting persistently weak consumer spending, which helped shrink the monthly trade deficit to the smallest since 1999.

Consumer sentiment wilted early this month to the weakest since March, when confidence in the financial sector and economy was at a low, the Reuters/University of Michigan Surveys of Consumers showed.

Consumers' growing anxiety about a longer economic downturn, job security and loss of wealth were key factors depressing sentiment, the survey said. Americans were also uneasy about the recent slip in stock prices, some analysts said.

Longer downturn

"It underlines the ongoing gloom facing the US consumer and further delays prospects for a near-term recovery. That will weigh heavily on risk sentiment," said Brian Dolan, senior currency strategist with Forex.com in New Jersey.

"Consumers concluded that the economic downturn would last longer and their personal finances would not recover as quickly as they had previously expected," the Reuters/University of Michigan Surveys of Consumers said in a statement.

The survey's preliminary index of confidence for this month fell to a reading of 64.6 from the final reading for last month of 70.8.

Recent income gains were reported by the fewest consumers in the more than 50-year history of the survey, the statement said.

The survey's expectations component "has been seen as reasonably influenced by equity price moves. Having had a good quarter, equities are down so far this month, so we thought that would be a little bit of a subtraction," said John Ryding, chief economist with RDQ Economics in New York.

The survey said: "Consumers reported a larger negative shift in their longer term outlook for the economy. The majority of consumers thought that widespread unemployment would persist over the next five years."

Despite the survey's negative outlook, Ryding said he does not think it "derails the recession-ending story."

"We think the recession came to an end in the second quarter but it is a little bit of a question mark on the part of consumers and we're just going to have to see how that plays out."

Trade gap narrows

The US trade gap narrowed unexpectedly to US$26 billion in May, the smallest since November 1999, as exports rose and domestic demand for foreign goods slumped, the government said.

May's import level was the lowest since July 2004 and May marked the 10th straight month in which imports declined, underscoring the weakness in the US economy.

The Commerce Department said exports rose 1.6 percent in May while imports fell 0.6 percent. Economists said the drop in imports signaled continued weakness in the recession-mired US economy.

"The trade deficit report is another indicator that things are not improving as expected," said William Larkin, portfolio manager with Cabot Money Management in Boston. "There is growing pessimism about how quickly the US will recover, which I think will be slower than people expect."




 

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