As Gasoline Prices Rise, Consumer Sentiment Falls

Gasoline prices
Gasoline prices

It looks like rising gasoline prices have made Americans a bit more downbeat as consumer sentiment unexpectedly fell 1.8 points to 72.7 in January. A Bloomberg survey had forecast an increase to 75 from the now-revised 74.5 in December and 71.6 in November. Back in December 200, around the beginning of the Great Recession, the sentiment index was 88.9.

The index's current conditions component fell 5.5 points to 79.8 from 85.3 in December.

The January report has two bright spots. The consumer expectations component rose to 68.2 from 67.5 in December. And Americans sense that the U.S. unemployment rate may have peaked. Only 21% of consumers surveyed expect joblessness to increase in the year ahead -- the lowest percentage in 10 years.

More Inflation in the Offing

The economy's recent rebound was bound to be reflected "in the near term by more favorable expected changes in employment," Richard Curtin, director of surveys of consumers for Thomson Reuters and the University of Michigan, said in a statement, Reuters reported.

Sponsored Links

Consumers' one-year inflation outlook rose to 3.3% in January from 3% in December, 3% in November and 2.7% in October. The five-year outlook was unchanged for the fourth straight month in January, at 2.8%.

Overall, January's preliminary consumer sentiment reading is disappointing. Modest labor market improvement and an income tax cut extension agreement in Washington were among the factors that triggered a modest uptrend in sentiment last autumn.

However, rising oil prices -- which have pushed U.S. gasoline prices up about 40 cents in the past three months, to an average price of $3.08 per gallon for regular unleaded -- are starting to weigh on consumers' mood. Americans sense that the economy has improved, but they also know rising energy prices are capable of both pinching their budgets and hurting businesses by pushing up their operating costs.