Democrats boost US consumer sentiment, current account deficit widens 52.9per cent

Democrats boost US consumer sentiment, current account deficit widens 52.9per cent

U.S. consumer sentiment increased in early September, with Democrats growing more upbeat about the economy's outlook ahead of the Nov. 3 presidential election while Republicans' optimism waned slightly.

Outbreak of the coronavirus disease (COVID-19) in New Jersey
FILE PHOTO: Hundreds of shipping containers are seen stacked at a pier at the Port of New York and New Jersey in Elizabeth, New Jersey, U.S., March 30, 2020. REUTERS/Mike Segar

WASHINGTON: U.S. consumer sentiment increased in early September, with Democrats growing more upbeat about the economy's outlook ahead of the Nov. 3 presidential election while Republicans' optimism waned slightly.

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.

Consumer sentiment among Democrats increased to 68.4 from a reading of 57.6 in August. It slipped to a reading of 95.7 among Republicans from 98.6. Among independents, consumer sentiment rose to 75.4 from 72.4 last month.

Though consumers believed Trump would be better for the economy, 40per cent did not expect either candidate would have an impact on their personal finances.

The survey also showed consumers gloomy about their current financial situation and less upbeat about future finances, likely reflecting the expiration of an unemployment benefits subsidy, and suggests consumer spending could slow further.

Nearly 30 million people remain on unemployment benefits six months after the pandemic started in the United States. Retail sales and production at factories slowed in August, indicating that economic recovery from the COVID-19 recession is stalling.

"More respondents reported an income decline rather than gain for the first time since 2014," said Tim Quinlan, a senior economist at Wells Fargo Securities in Charlotte, North Carolina. "Lower-income households reported a decline more frequently."

A separate report from the Conference Board on Friday showing its measure of future U.S. economic growth increased 1.2per cent in August after advancing 2.0per cent in July. It said last month's modest rise in the leading economic index "suggests that this summer's economic rebound may be losing steam heading into the final stretch of 2020."

Stocks on Wall Street were trading lower. The dollar slipped against a basket of currencies. U.S. Treasury prices were mixed.

CAUTIOUS ATTITUDES

A third report from the Commerce Department showed the current account deficit soared to an almost 12-year high in the second quarter as the 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 52.9per cent to US$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 US$111.5 billion shortfall, instead of US$104.2 billion as previously reported. Economists had forecast the current account gap increasing to US$157.9 billion in the second quarter.

The current account gap represented 3.5per cent 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 US$444.7 billion, the lowest since the first quarter of 2010, from US$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 US$609.6 billion, the lowest level since the third quarter of 2010, from US$732.0 billion in the first quarter. The decline mostly reflected decreases in imports of motor vehicles, parts and engines, as well as petroleum.

The amount of money leaving the country also fell last quarter, with declines in interest on loans and deposits. Private sector fines and penalties, as well as government transfers like international aid also declined last quarter.

(Reporting by Lucia Mutikani; Editing by Kevin Liffey and Andrea Ricci)

Source: Reuters

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