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US consumer sentiment plummeted to a decade low in early August

US consumer sentiment fell sharply in early August to its lowest level in a decade, a worrying sign for the economy as Americans gave volatile prospects for everything from personal finances to inflation and employment, a poll showed.

The unexpected reading could be Federal Reserve policymakers will pause if this causes a dip in economic activity in the coming months. The central bank is getting closer to a decision on when to start withdrawing the extraordinary incentives it has been using to protect the economy from the Covid-19 pandemic.

The University of Michigan announced that its preliminary consumer sentiment index fell to 70.2 from 81.2 in July in the first half of this month. That was its lowest level since 2011, and there have been only two major declines in the index in the past 50 years. These were in the depths of the 2007-2009 recession and during the first wave of shutdowns in April 2020 at the beginning of the pandemic.

The losses were spread across income, age, and educational subgroups and extended across all regions. Economists polled by Reuters had forecast that the index would remain unchanged at 81.2.

US stock market indices slipped immediately after the report was releasedwhile the gold price gained ground. US Treasury bond yields hit session lows.

“The renewed slump suggests that The recent wave of virus cases triggered by the Delta variant could weigh more heavily on the economy than we thought, “said Andrew Hunter, an economist with Capital Economics.

Economic growth is expected to continue this year as fast as it has been in four decades after slipping into brief recession in 2020 due to the coronavirus pandemic. But the recovery is showing some signs of cooling.

Covid-19 cases have doubled in the past two weeks to hit a six-month high because the more transferable Delta variant is spreading quickly across the country. Labor shortages also persist in the service sector while supply chain disruptions persist.

REUTERS / Ann Saphir / File Photo