US consumer sentiment picks up, current account deficit at 52.9%
People carry shopping bags from Macy’s Herald Square in Manhattan, New York City. File/Reuters
The survey from the University of Michigan on Friday, however, showed President Donald Trump, a Republican, and his Democratic Party challenger, former Vice President Joe Biden, in “a virtual tie” when assessing consumers’ responses between July and September on which candidate they thought would win the election, not whom they favored or how they intended to vote.
“The September gains were primarily in the outlook for the economy, and it was Democrats that posted gains in economic prospects while optimism about the economy weakened among Republicans,” the University of Michigan Surveys of Consumers chief economist Richard Curtin said in a statement.
The University of Michigan’s consumer sentiment index rose to 78.9 in the first half of this month from a final reading of 74.1 in August. The index remains 22.1 points below February’s level. Economists polled by Reuters had forecast the index edging up to a reading of 75 in early September.
Though consumers believed Trump would be better for the economy, 40% did not expect either candidate would have an impact on their personal finances.
The improvement in sentiment is welcome amid signs that the economic recovery from the COVID-19 recession is stalling, with nearly 30 million people on unemployment benefits six months after the pandemic started in the United States. Retail sales and production at factories slowed in August.
The moderation in activity comes as government money to help businesses pay wages and the unemployed get by is running out. That was underscored by a separate report from the Conference Board on Friday showing its measure of future US economic growth increased 1.2% in August after advancing 2.0% in July.
The Conference Board said last month’s small gain in the leading economic index “suggests that this summer’s economic rebound may be losing steam heading into the final stretch of 2020.”
A third report from the Commerce Department on Friday showed the current account deficit soared to its highest level in nearly 12 years in the second quarter as the COVID-19 pandemic weighed on the export of goods and services, offsetting a shrinking import bill.
The current account deficit, which measures the flow of goods, services and investments into and out of the country, jumped 52.9% to $170.5 billion last quarter. That was the biggest gap since the third quarter of 2008 when the economy was working its way through the Great Recession.
Data for the first quarter was revised to show a $111.5 billion shortfall, instead of $104.2 billion as previously reported. Economists had forecast the current account gap increasing to $157.9 billion in the second quarter.
The current account gap represented 3.5% of gross domestic product in the April-June quarter, the biggest share since the fourth quarter of 2008.
The Commerce Department’s Bureau of Economic Analysis, which compiles the data, said the decline in transactions resulted “in part from the impact of COVID-19, as many businesses were operating at limited capacity or ceased operations completely, and the movement of travelers across borders was restricted.” “While more recent data already show a firm pick-up in trade, the scale of the drop means it will take some time for a full recovery,” said James Watson, a senior economist at Oxford Economics in New York.
In the second quarter, exports of goods and services dropped to $444.7 billion, the lowest since the first quarter of 2010, from $605.6 billion in the January-March period. There were sharp declines in the export of petroleum, civilian aircraft and motor vehicles and engines.
Travel restrictions undercut air travel. Income from abroad also fell last quarter, reflecting decreases in portfolio investment income and direct investment income. There were also decreases in interest on loans and deposits. Income from private sector fines and penalties also fell.
Imports of goods and services dropped to $609.6 billion, the lowest level since the third quarter of 2010, from $732.0 billion in the first quarter. The decline mostly reflected decreases in imports of motor vehicles, parts and engines, as well as petroleum.
US stocks turned lower in volatile trading on Friday as worries about rising coronavirus cases and a patchy economic recovery dampened risk sentiment, with technology-related stocks reversing early gains to extend their declines to a third day.
Wall Street’s three main indexes bounced earlier this week as investors bet on a loose monetary policy by the Federal Reserve, but gains petered out in the absence of firm details on the central bank’s stimulus plan.
The S&P 500 and the Nasdaq have also come under pressure from investors rotating out of high-flying tech-related stocks and into industrial and transportation firms.
Apple Inc, Microsoft Corp, Amazon.com Inc and Alphabet Inc led declines on the Nasdaq, which fell between 1.5% and 2%.
Reuters
