Consumer Sentiment Bounces Back, Fears of Deflation Ease
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August 13 Two economic reports today seemed to signal that the U.S. economy remains on a recovery course despite a slowdown in recent months.
Consumer sentiment as charted by the Reuters/University of Michigan Index of Consumer Sentiment rose in the first two weeks of August, rebounding from a nine-month low in July.
The current Index stands at 69.6, up from 67.8 in July, its lowest point since November 2009. The rise was the greater than had been expected among economists surveyed by Bloomberg News, Bloomberg.com
Rising consumer confidence is viewed as evidence that the economic recovery is more likely to continue, even though economic activity has slowed and growth forecasts for the remainder of the year have been scaled back.
"Some of the fears about the economic outlook that were heightened in July have diminished," Jonathan Basile, an economist for Credit Suisse bank told Bloomberg.com.
In related news, the Consumer Price Index increased 0.3% (seasonally adjusted) in July, the first increase in four months, reported the U.S. Bureau of Labor Statistics (BLS).
The latest figures dampened concerns that the economy could face deflation. Deflation is feared because as prices fall they significantly damage the prospects for economic expansion.
With volatile fuel and food prices excluded, the cost of living rose 0.1% last month. Rents increased in July, as did the cost of clothing, used cars and tobacco. Energy prices rose for the first time since January, said the BLS report. Food prices declined for the fourth month in a row, led by falling prices for fruits and vegetables.
Read the bloomberg.com report on consumer sentiment.
Read the BLS Consumer Price Index report.