Consumer confidence unexpectedly fell in April to the weakest level in seven months as Americans were rattled by unsatisfying wage growth and concern over how the upcoming presidential election would impact the economy.
The University of Michigan’s preliminary sentiment index for this month fell to 89.7, the lowest since September, from 91 in March. The median projection in a Bloomberg survey called for 92. The gauge averaged 92.9 last year, the best annual performance since 2004.
Steady employment gains haven’t yet translated into robust pay increases, leaving Americans impatient as they continue to mend balance sheets. About a fifth of those surveyed mentioned the election or government policy as likely to have negative implications for future economic growth, almost twice as many as in March.
“None of these declines indicate an impending recession, although concerns have risen about the resilience of consumers in the months ahead,” Richard Curtin, director of the University of Michigan consumer survey, said in a statement.
Consumer confidence estimates in the Bloomberg survey of 65 economists ranged from 90 to 96.2.
The current conditions index, which measures Americans’ perception of their personal finances, declined to 105.4 from the prior month’s 105.6.
The gauge of expectations six months from now dropped to 79.6 from 81.5.
Respondents expected the inflation rate in the next year will be 2.7 percent, the same as in the March survey. Over the next five to 10 years, they project a 2.5 percent rate of price growth, down from 2.7 percent in the prior month. It matched the record lows that was last equaled in February in data back to 1979.
The contentious presidential primaries are having an impact, according to the report. While the survey doesn’t typically ask about politics until later in an election year, 19 percent of those polled “spontaneously” said news about the vote and government policy made them more negative toward the outlook.
The one-year outlook index for those participants was 28 points lower than for the rest, while the five-year view was 39 points weaker, according to the Michigan survey.
Americans might be starting to process a modest rise in gasoline prices after subdued costs for much of last year. The average cost of a gallon of regular unleaded gasoline was $2.10 on Apr. 13, the highest since November, according to motoring group AAA.
A strengthening labor market and burgeoning signs of a pickup in wages are providing more encouraging signals for consumers. Payrolls advanced by 215,000 in March after a 245,000 gain the previous month and the unemployment rate edged up to 5 percent from an eight-year low of 4.9 percent as more Americans entered the workforce.
Wage growth rebounded last month, offering some hope that a tightening job market might bring bigger boosts to paychecks. Average hourly earnings climbed 0.3 percent from February, more than economists forecast, after a 0.1 percent drop.