WASHINGTON (MNI) – U.S. consumer sentiment improved in the final
reading for September after plummeting last month to levels not seen
since May 1980, according to the Reuters/University of Michigan Consumer
Sentiment survey released Friday.

The index came in at 59.4 — above median expectations of 57.8 —
vs. the preliminary reading of 57.8. The consumer sentiment index was
55.7 in August and 63.7 in July.

The index’s final measure of consumers’ view of current conditions
in September came in at 74.9, a phantom improvement over September’s
inital reading of 74.5. The index was 68.7 in August, and 75.8 in July.

After declining to 47.0 in the preliminary report, the lowest since
May 1980, the final gauge of consumers’ expectations rose slightly to
49.4. This after coming in at 47.4 in August and 56.0 in July.

Consumers’ final 1-year inflation expectations for September was
3.3%, down from an expectation of 3.5% in August. The expectation was
for 3.4% in July. Final five-year inflation expectations are at 2.9%,
down from the preliminary expectation of 3.0% but unchanged vs. the last
two months.

Despite the small move upwards, the fact that consumer sentiment
remains at low levels in September is hardly surprising, as ongoing
worries over anemic economic growth in the United States and the the
persistently high level of unemployment cause Americans to be — as
Federal Reserve Chairman Ben Bernanke put it — “exceptionally

The August U.S. Personal Income report Friday showed disappointing
consumption as wages dropped; moreover, July spending was revised lower.
August Personal Income declined by 0.1%, in its first drop since -0.1%
in October 2009. Private wages retreated $12.2 billion after gaining
$23.8 billion in July as goods and services payrolls fell.

Philadelphia Fed President Charles Plosser said in a speech
Thursday that recent volatility in financial markets has contributed to
sharp declines in business and consumer sentiment. “But with a high
degree of uncertainty over future taxes, regulations, and the financial
ramifications of the European sovereign debt situation, it is no wonder
that sentiment is flagging and this decline poses added risk to the
growth forecast,” he said.

The raging EU sovereign debt crisis, and the risk of a negative
feedback loop feeding into the financial system and real economy, has
policymakers in the U.S. and elsewhere very concerned.

Dallas Federal Reserve President Richard Fisher Tuesday said U.S.
federal regulators must make sure there is no contamination from the
turmoil across the Atlantic, and ensure that U.S. financial institutions
are not exposed to any “trip wires” or contagion from Europe’s woes.

** Market News International Washington Bureau: 202-371-2121 **