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Economic Watch: Consumer Sentiment Drops, Leading Indicators Increase

July 18, 2014

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Consumer sentiment in the U.S. declined this month, the third straight monthly drop and hitting its lowest level in four months.

The Thomson Reuters/University of Michigan preliminary index of sentiment dropped to 81.3 this month from a final reading of 82.5 in June, according to a report issued Friday.

The survey's measure of current economic conditions rose to 97.1 from 96.6, while the gauge of consumer expectations slipped for a third straight month, to 71.1 from 73.5.

"The most remarkable aspect of recent trends in consumer confidence has been its resistance to change in either direction due to very negative gross domestic product nor very positive employment gains," said survey director Richard Curtin. "This stability will provide the necessary strength for consumer spending to continue to expand, but does not support an acceleration in spending above 2.5%."

Meantime, a separate report, also released Friday, shows the Conference Board’s Leading Economic Index for the U.S. increased 0.3% in June to 102.2, following an upwardly revised 0.7% increase in May, and a 0.3% increase in April.

 “Broad-based increases in the LEI over the last six months signal an economy that is expanding in the near term and may even somewhat accelerate in the second half,” said Ataman Ozyildirim, economist at The Conference Board. “Housing permits, the weakest indicator during this period, reflects some risk to this improving outlook. But favorable financial conditions, generally positive trends in the labor markets and the outlook for new orders in manufacturing have offset the housing market weakness over the past six months.”

The index is used to gauge where the economy is heading in the next three to six-months.

“The index shows the pace of economic activity continued to expand moderately through June,” said Ken Goldstein, economist at The Conference Board. “Stronger consumer demand driven by sustained job gains and improving confidence remains the main source of improvement for the U.S. economy. In addition to a stronger housing market, more business investment could also provide an upside to the overall economy.”

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