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Consumer Sentiment Hit Low Point In July

Written by Ken Gaebler
Published: 8/2/2012

Consumer spending dropped sharply in July due to lingering economic uncertainties and the anticipation of rising food prices.

Business owners aren't the only ones concerned about the U.S. economy. In the most recent index of consumer sentiment, American consumers appear to be putting the brakes on spending across a variety of goods and service categories.

Consumer Sentiment Drops in July 2012

The University of Michigan-Thomson Reuters index of consumer sentiment for the end of July came in at 72.3 -- a slight uptick from the initial report of 72 near the beginning of the month, but still significantly down from 73.2 in June.

"Consumers expect continued economic stagnation since they believe that current economic policies are incapable of solving the problems facing the economy," said Richard Curtin, the chief economist for the surveys of consumers.

Declining consumer sentiment comes on the heels of consumer concerns regarding rising food prices and the Commerce Department's announcement that U.S. Gross Domestic Product (GDP) rose a dismal 1.5% during the second quarter.

With just 10% of consumers expecting inflation-adjusted gains in income during the coming year, it's unlikely that GDP or spending will improve significantly in the near term. Instead, consumers are opting to increase personal savings -- possibly reflecting ongoing worries about the lack of available jobs, the crisis in Europe and other economic variables.

July's sluggish consumer sentiment will inevitably impact entrepreneurs who are planning for business growth. Rather than moving forward with planned expansions or new business launches, some entrepreneurs who are uncertain about their business prospects may delay hiring and investment decisions by as much as six months or more. At the same time, many entrepreneurs will continue to move forward undeterred by the latest economic indicators.

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