Consumers are gloomiest since Katrina aftermath

By Pedro Nicolaci da Costa
Friday, December 7, 2007; 11:22 AM

NEW YORK (Reuters) - U.S. consumer sentiment soured for a third straight month in December as a housing recession and expensive gasoline left consumers at their gloomiest since the aftermath of Hurricane Katrina, a report showed on Friday.

The Reuters/University of Michigan index of confidence fell to 74.5, slightly below analyst forecasts and down from 76.1 in November. Excluding a post-Katrina report in October 2005, it was the worst reading in 15 years.

The U.S. economy has been plagued by a housing crisis that spread to mortgage-linked financial assets and crippled the credit system, threatening growth.

Consumers' perceptions of current conditions improved modestly, but expectations about the future deteriorated to match their lowest since 1992, according to Reuters/University of Michigan.

The survey's index of current economic conditions edged up to 92.1 in early December from 91.5 in November while its reading of consumer expectations slipped to 63.2 from 66.2.

"The outlook for growth is quite dire," said T.J. Marta, fixed-income strategist at RBC Capital Markets.


The survey also revealed a widening divide in sentiment between rich and poor. "Additional losses among lower income households more than offset the gains among upper income households," said Richard Curtin, who leads the organization's business survey committee.

"The data document a widening gap across income groups from what was already an all-time record," he said.

In one ray of hope for the troubled housing sector, depressed prices appeared to be attracting some interest, with home-buying intentions rising for the first time in six months.

Still, the report said this would not likely translate into a rebound any time soon.

"Consumers will remain on the sidelines until any additional price declines are seen as unlikely," the survey found.

But not all costs were expected to go down. Consumers believe things such as food and gasoline will continue to dent the pocketbook. Inflation expectations for the coming year rose to 3.5 percent, its highest since August 2006.

(Editing by Tom Hals)

© 2007 Reuters