Sentiment among barbers, shopkeepers and other merchants on the front lines of the economy fell to a 2 1/2-year low as falling wages and a stock-market plunge discouraged consumers from spending.
The Economy Watchers index, a gauge of domestic demand via a survey of about 2,000 people who deal directly with consumers, fell to 44.7 points in July, the fourth straight monthly decline, the Cabinet Office said Wednesday. A number less than 50 means pessimists outnumber optimists.
It was the lowest reading since the index hit 44.2 in December 2004.
Consumer-spending growth probably slowed in the second quarter to half the pace of the first, the government's gross domestic product report is expected to show next week. The lowest jobless rate since 1998 has yet to reverse a decade-long slide in wages that has constrained spending and left the economy dependent on exports.