By Shobhana Chandra
Sept. 26 (Bloomberg) -- The turmoil that roiled U.S. financial markets in the past few weeks probably restrained consumer sentiment in September even as gasoline prices dropped, economists said before a report today.
The Reuters/University of Michigan's final confidence reading dropped to 71 this month from a preliminary estimate of 73.1 issued two weeks ago, according to the median forecast of 61 economists surveyed by Bloomberg News. The measure would still be up from August, reflecting the drop in fuel costs.
Since the preliminary report was issued on Sept. 12, Lehman Brothers Holdings Inc. filed for bankruptcy, the federal government took over American International Group Inc. and stocks plummeted. The biggest financial meltdown since the Great Depression is likely to hurt consumer spending and the economy for the rest of the year.
``The crisis in U.S. financial markets will lead to a quick reversal of gains seen in early September,'' said Brian Bethune, an economist at Global Insight Inc. in Lexington, Massachusetts. ``Weakening household finances will pull down real consumer spending in the third and fourth quarters of 2008.''
The sentiment report is due at about 10:00 a.m. Washington time. Survey estimates ranged from 63.9 to 73.3. The gauge registered a reading of 63 last month and slumped to a 28-year low of 56.4 in June. It has averaged 87.5 since monthly figures became available in 1978.
Growth Estimate
Revised figures from the Commerce Department at 8:30 a.m. are forecast to show the economy accelerated in the second quarter as exports surged and the government's tax rebates boosted consumer spending.
The world's largest economy expanded at 3.3 percent annual pace from April through June, the same as estimated last month, after growing at a 0.9 percent pace in the first quarter, according to the survey median.
The Bush administration is working with Congress on a rescue plan for troubled banks to prevent growth from faltering. Economists surveyed by Bloomberg earlier this month anticipated the economy will grow at a 1.2 percent pace this quarter as consumer spending stalls.
The final Reuters/University of Michigan sentiment report reflects about 500 responses, compared with 300 households for the preliminary survey.
Early in the month, confidence was buoyed by the drop in fuel costs. Regular unleaded gasoline at the pump cost $3.67 a gallon on average in the first two weeks of September, compared with $3.76 in August and more than $4 in July, according to AAA.
At the same time, eight consecutive months of job losses and declines in home prices are making shoppers wary. Bed Bath & Beyond Inc., the largest U.S. home-furnishings retailer, reported a 19 percent drop in second-quarter profit, and predicted a decline in earnings this quarter.
Sales ``continued to be negatively affected by the economic slowdown in general and by issues specific to the housing industry in particular,'' Chief Executive Officer Steven Temares said on a conference call on Sept. 24.
Bloomberg Survey
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GDP PersonalU of Mich
Annual Consump. Conf.
QOQ% QOQ% Index
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Date of Release 09/26 09/26 09/26
Observation Period 2Q F 2Q F Sept. F
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Median 3.3% 1.7% 71.0
Average 3.3% 1.7% 70.5
High Forecast 3.5% 1.7% 73.3
Low Forecast 3.0% 1.5% 63.9
Number of Participants 76 10 61
Previous 3.3% 1.7% 73.1
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4CAST Ltd. 3.3% --- 73.1
Action Economics 3.3% --- 73.1
AIG Investments 3.4% --- 72.0
Aletti Gestielle SGR 3.4% 1.7% 71.0
Allianz Dresdner Economic 3.0% --- ---
Argus Research Corp. 3.1% --- 64.0
Banc of America Securitie 3.3% --- ---
Bank of Tokyo- Mitsubishi 3.3% --- 73.1
Bantleon Bank AG 3.3% --- 71.0
Barclays Capital 3.3% --- 68.0
BBVA 3.3% --- 69.5
BMO Capital Markets 3.3% --- 71.0
BNP Paribas 3.2% --- 73.3
Briefing.com 3.4% --- 71.0
Calyon 3.3% --- 70.0
CFC Group 3.3% --- 71.5
CIBC World Markets 3.4% --- ---
Citi 3.4% --- 73.0
ClearView Economics 3.2% --- ---
Credit Suisse 3.3% --- 70.0
Daiwa Securities America 3.4% --- 70.0
DekaBank 3.3% --- 70.5
Desjardins Group 3.3% --- 69.0
Deutsche Bank Securities 3.3% --- 73.1
Deutsche Postbank AG 3.3% --- 71.0
Dresdner Kleinwort 3.3% --- 69.0
DZ Bank 3.3% --- ---
First Trust Advisors 3.4% --- 72.0
Fortis 3.3% --- 68.0
FTN Financial 3.3% --- 71.0
Global Insight Inc. 3.3% --- 70.5
Goldman, Sachs & Co. 3.3% --- ---
H&R Block Financial Advis 3.4% 1.7% 69.0
Helaba 3.3% 1.7% 71.0
High Frequency Economics 3.3% --- ---
HSBC Markets 3.3% --- 70.0
IDEAglobal 3.3% 1.7% 71.0
Informa Global Markets 3.3% --- 71.5
ING Financial Markets 3.3% --- 70.0
Insight Economics 3.5% --- 71.5
Intesa-SanPaulo 3.3% --- 70.0
J.P. Morgan Chase 3.3% --- 71.0
Janney Montgomery Scott L 3.3% 1.7% ---
Landesbank Berlin 3.5% --- 69.3
Landesbank BW 3.3% --- 73.0
Lehman Brothers 3.3% --- 70.0
Lloyds TSB 3.3% --- 72.5
Maria Fiorini Ramirez Inc 3.3% --- ---
Merk Investments 3.3% --- 63.9
Merrill Lynch 3.4% --- 70.0
MFC Global Investment Man 3.3% 1.7% 71.0
Moody's Economy.com 3.4% --- 70.0
Morgan Keegan & Co. 3.3% 1.7% ---
Morgan Stanley & Co. 3.4% --- ---
National Bank Financial 3.3% --- 73.0
National City Corporation 3.4% --- 72.0
Natixis 3.5% --- 69.0
Newedge 3.2% 1.5% 69.0
Nomura Securities Intl. 3.3% --- ---
PNC Bank 3.2% --- ---
RBS Greenwich Capital 3.5% 1.7% 71.0
Ried, Thunberg & Co. 3.3% --- 68.0
Schneider Trading Associa 3.3% 1.7% 68.9
Scotia Capital 3.3% --- ---
Societe Generale 3.0% --- 73.0
Standard Chartered 3.3% --- 70.0
Stone & McCarthy Research 3.4% --- 71.0
TD Securities 3.3% --- 70.0
Thomson Financial/IFR 3.1% --- 70.0
UBS Securities LLC 3.3% --- ---
Unicredit MIB --- --- 68.0
University of Maryland 3.3% --- 73.1
Wachovia Corp. 3.4% --- ---
Wells Fargo & Co. 3.3% --- 73.1
WestLB AG 3.3% --- 72.8
Westpac Banking Co. 3.3% --- 70.0
Wrightson Associates 3.3% --- 68.0
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To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net
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