The Wealth Effect Hits Consumer Sentiment

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With the wealth effect primarily reaching those with high incomes and asset holdings, consumer sentiment is struggling to sustain a significant move higher. According to Thomson Reuters/University of Michigan’s preliminary reading, consumer sentiment fell to 80.4 in January compared to a reading of 82.5 in December.

The results were weaker than estimated. On average, economists expected the index to reach 83.5 this month. In 2013, consumer sentiment has ranged from a low of 73.2 in October to a high of 85.1 in July. The report comes just one week after the Labor Department said wage growth remained stagnant last year, and the number of people in the labor force continues to decline.

“Upper-income households benefited from continued strong gains in income as well as increases in stock and home values,” survey director Richard Curtin said in a statement. “Low- and middle-income households were mainly concerned about lackluster growth in employment and income, and anticipated less improvement in long-term prospects for the economy.”

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