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Future conditions worry consumers, sentiment drops
WASHINGTON (7/21/14)--Concerned over what the future holds, consumer confidence dipped in July, as the overall index for Friday's University of Michigan consumer sentiment survey fell 1.2 points to 81.3.

While feelings over current financial situations slightly improved for consumers, pessimistic expectations for the next 12 months largely fueled the drop in the overall index with a 2.4-point pull back to 71.1.

"Respondents' assessment of their future financial prospects hit a four-month low, possibly reflecting worries that escalating conflicts in Ukraine and the Middle East could send shock waves through the U.S. economy in coming months," said Nate Kelley, Moody's analyst ( Economy.com July 18).

Consumers also forecasted a 3.3% increase in prices over the next 12 months, which is a slightly higher pace than was estimated in June. Shoppers believe prices over the next five years will climb 2.6% on average, which is 0.3% slower than last month's expectation.

Meanwhile, despite the survey, Moody's analysts believe sentiment may bounce back in future months, as upward pressure on wages appears to be mounting as the labor market tightens.

The National Federation of Independent Business' Small Business Optimism Index, Moody's reported, revealed that an increasingly larger share of firms expect they will boost compensation in the coming months, which should bolster confidence in personal finances, and subsequently overall sentiment ( Economy.com ).


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