Univ. of Michigan: Consumer Sentiment Falls Sharply

U.S. consumer sentiment (search) worsened in September even more than economists had projected and expectations remained at their lowest for over 13 years, the University of Michigan said Friday.

The University of Michigan's (search) index of consumer sentiment dropped to 76.9 in September from 89.1 in August, but was unchanged from the preliminary reading in early September, according to sources who saw the subscription-only report.

A Reuters poll had projected a reading of 78.0.

But analysts said that while the report fell a little short of expectations, the index had seemingly stabilized after the impact of Hurricane Rita (search), which hit the Katrina-stricken Gulf Coast in mid-September, was not as dire as many had feared.

However, the survey's expectations component fell to 63.3 from 76.9 in August, its lowest in nearly 14 years. The index had already fallen to 63.6 in early September after Katrina.

"Economists have to worry that if consumer sentiment remains depressed, spending could follow that down and you could have a much weaker outcome (in terms of economic growth," said Cary Leahey, senior managing director at Decision Economics (search) in New York.

Confidence measures are used as an indicator of consumer spending, which makes up about two-thirds of overall U.S. economic activity and is used as a gauge of economic growth.

The index of current conditions dropped to 98.1 from 108.2 in August.