Instant view: Consumer sentiment slumps in July

NEW YORK (Reuters) - U.S. consumer sentiment deteriorated in early July to the lowest level since March 2009 on increasing pessimism over falling income and rising unemployment, a survey released on Friday showed.

KEY POINTS: * Confidence in government economic policies also curdled, the Thomson Reuters/University of Michigan survey showed. U.S. lawmakers are wrangling over a budget deal that would allow the government to raise the debt ceiling -- needed so the United States can fund its obligations next month.

COMMENTS:

STEPHEN STANLEY, CHIEF ECONOMIST, PIERPONT SECURITIES, STAMFORD, CONNECTICUT

"It's a big downside surprise. I do wonder how much people are bummed out with what's happening in Washington. I can't imagine the debt ceiling talks filtering into the mainstream press is helping. The weakness in the employment number the past couple of months is also impacting confidence. But the weekly retail sales numbers the past several weeks have perked up. Still, consumers are very cautious right now. We are going to have to see some positive news to see an improvement in attitude so consumer spending improves in a substantial way."

PIERRE ELLIS, SENIOR ECONOMIST, DECISION ECONOMICS, NEW YORK:

"This decline in consumer sentiment is troubling. Sentiment

seems to have sagged in July. The big surprise is the lack of positive impact from lower gasoline prices. Lower prices are fully registered in the lower inflation expectations, but they're not at all reflected in the overall sentiment figures. We had a shaky stock market in this time frame. The employment numbers obviously did not help. It's beginning to look like consumer spending is getting a little ragged around the edges, too, so this decline in sentiment is troubling."

WARD MCCARTHY, CHIEF FINANCIAL ECONOMIST, JEFFERIES & CO, NEW YORK:

"Its pretty ugly. This is a really weak number, it's the weakest number since March 09, which is not good. I would say that this is an indication that the not-handling of the debt ceiling in Washington is certainly impairing consumer confidence. The good news is that inflation expectations eased off, so consumers are less concerned about inflation. But the economic conditions deteriorated, confidence deteriorated and the outlook deteriorated and I would be very surprised if that were due to anything besides the fact that the government at this point in time is not making us all feel good about things."

PATRICK O'KEEFE, DIRECTOR OF ECONOMIC RESEARCH, J.H. COHN, NEW YORK: