NEW YORK – U.S. consumer sentiment took an unexpectedly sharp fall in early February as Americans turned cautious over the economy, a survey showed Friday.
The University of Michigan's (search) preliminary reading of consumer sentiment tumbled to 93.1 in February from January's final reading of 103.8, which was its highest level in over three years, according to market sources who saw the report.
That was way below economists' forecasts of 103.3 and confirmed market speculation the figure would be dramatically lower.
"It is kind of a stunner. A 10-point drop in the confidence index is significant and suggests there is a new pessimism amongthere a month ago," said Chris Low, chief economist, FTN Financial in New York.
"I suspect it has something to do with three surprisingly weak employment reports in a row," he added.
U.S. Treasury yields gained on the surprisingly weak report, while the dollar slipped, falling to near a record low against the euro.
The current conditions index fell to 100.4 from 109.5 in January, while the expectations index dropped to 88.4 from a final reading of 100.1 last month.
The report, which is released only to paying subscribers, was consistent with a consumer sentiment survey put out on Tuesday by Investor's Business Daily (search), whose index fell to 56.5 in February from 60.6 in January.
Analysts say a wobbly jobs sector has dampened consumer confidence despite a strengthening U.S. economy.
Some, however, have cautioned against reading too much into the report, since it has no bearing on actual spending patterns of consumers. But the dip in consumer sentiment is troubling at this stage of the U.S. recovery, analysts agree. Consumer spending leads to business spending, which leads to more jobs.
The University of Michigan survey is based on telephone interviews with 500 U.S. households over the course of the month on personal finances and business and buying conditions.
The preliminary survey, released about midway through the month, is based on the first 250 interviews.