|
 The snapback in sentiment reported on Friday underscored robust
domestic demand and offered hope that consumer spending would remain
solid enough to support economic growth, which has slowed
significantly in recent months.
The University of Michigan said its consumer sentiment index rose to
92.1 in early October from a reading of 87.2 September. The survey's
current conditions sub-index shot up to 106.7 this month from 101.2
in September.
The index at current levels has historically been consistent with
roughly a 4 percent annualized rate of consumer spending growth,
according to economists.
"This suggests that U.S. household sentiment has turned an important
corner, and is a hopeful sign on the outlook for consumer spending
activity going forward, given signs of weakness in other parts of
the economy," said Millan Mulraine, deputy chief economist at TD
Securities in New York.
The rise in sentiment, which likely reflected cheaper gasoline
prices, suggested limited impact from recent stock market
volatility. Consumers were the most optimistic about their personal
financial expectations since 2007.
Their views toward purchases of long-lasting manufactured goods were
equally bullish.
Consumer spending accounts for more than two-thirds of U.S. economic
activity and has been the bright spot in the economy as the
industrial sector wobbles under the onslaught of slowing global
growth and the resurgent dollar, which have eroded demand for U.S.
manufactured goods.
It is also being weighed down by lower energy oil prices that have
undercut capital investment in the energy sector, as well as an
effort by businesses to whittle down their inventories.
U.S. stocks were trading higher on Friday, while prices were U.S.
Treasuries were mostly weaker. The U.S. dollar rose against a basket
of currencies.
WEAK INDUSTRIAL PRODUCTION
In a separate report, the Federal Reserve said industrial output
slipped 0.2 percent on renewed weakness in oil and gas drilling
after dipping 0.1 percent in August. Industrial production rose at
an annual rate of 1.8 percent in the third quarter.
"We do not expect the recent slowing to lead to a broader pullback
in aggregate growth, as service sector activity remains solid," said
Jesse Hurwitz, an economist at Barclays in New York.
Manufacturing accounts for about 12 percent of the U.S. economy.
Still, the weak industrial production report added to soft trade,
retail sales and employment data that have pointed to a significant
slowdown in growth after the economy expanded at a 3.9 percent
annual pace in the second quarter.
[to top of second column] |
Third-quarter growth estimates are currently around a 1.5 percent
rate. Slower growth and low inflation have diminished expectations
of an interest rate hike from the Fed this year.
Manufacturing output fell 0.1 percent in September even though
robust demand for automobiles lifted motor vehicle and parts
production by 0.2 percent. Manufacturing output dropped by 0.4
percent in August. For the third quarter, manufacturing output
increased at a rate of 2.5 percent.
There were declines in the production of computer and electronic
products, as well as electronic equipment, appliances and
components. Primary metals and machinery output increased.
Mining production fell 2.0 percent as oil and gas well drilling
tumbled 4.0 percent after increasing for two straight months. An
almost 60 percent plunge in oil prices since June 2014 has hurt the
profits of oil-field companies like Schlumberger <SLB.N> and
Halliburton <Haling>, leading to deep cuts in their capital spending
budgets.
Utilities production increased 1.3 percent in September. With output
declining, industrial capacity use fell to 77.5 percent from 77.8
percent in August. Officials at the Fed tend to look at capacity use
as a signal of how much "slack" remains in the economy and how much
room there is for growth to accelerate before it becomes
inflationary.
The lackluster industrial production picture was reflected in a
swathe of manufacturers' results on Friday, with General Electric Co
<GE.N> and Honeywell International Inc <HON.N> reporting dips in
revenue along with profits that were better than forecast.
(Reporting by Lucia Mutikani; Editing by Paul Simao)
[© 2015 Thomson Reuters. All rights
reserved.] Copyright 2015 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed. |
