US Consumer Sentiment Drops to 7-Month Low

The University of Michigan's consumer sentiment for the US fell to 92.1 in August 2019 from 98.4 in the previous month and well below market consensus of 97.2, a preliminary estimate showed. That was the lowest reading since January.

The consumer expectations sub-index declined to 82.3 in August from the previous month's 90.5; while the gauge for current economic conditions decreased to 107.4 from 110.7.

Inflation expectations for the year ahead picked up to 2.7 percent in August from 2.6 percent in July; and the 5-year outlook advanced to 2.6 percent from 2.5 percent.

"Consumer sentiment declined in early August to its lowest level since the start of the year. The early August losses spanned all Index components. Although the Expectations Index recorded more than twice the decline in August as the Current Conditions Index (-8.2 versus -3.3), the Current Conditions Index fell to its lowest level since late 2016. Monetary and trade policies have heightened consumer uncertainty—but not pessimism—about their future financial prospects. Consumers strongly reacted to the proposed September increase in tariffs on Chinese imports, spontaneously cited by 33% of all consumers in early August, barely below the recent peak of 37%. Although the announced delay until Christmas postpones its negative impact on consumer prices, it still raises concerns about future price increases. The main takeaway for consumers from the first cut in interest rates in a decade was to increase apprehensions about a possible recession. Consumers concluded, following the Fed’s lead, that they may need to reduce spending in anticipation of a potential recession. Falling interest rates have long been associated with the start of recessions—see the featured chart. Perhaps the most important remaining pillar of strength for consumer spending is favorable job and income prospects, although the August survey indicated some concerns about the future pace of income and job gains. It is likely that consumers will reduce their pace of spending while keeping the economy out of recession at least through mid 2020." Surveys of Consumers chief economist, Richard Curtin, said.

US Consumer Sentiment Drops to 7-Month Low

University of Michigan | Joana Ferreira |
8/16/2019 2:06:30 PM