US Consumer Sentiment Revised Lower to Near 3-Year Low

The University of Michigan's consumer sentiment for the US was revised lower to 89.8 in August 2019 from a preliminary estimate of 92.1 and well below the previous month's final 98.4. It was the lowest reading since October 2016, as both consumer expectations and current conditions sub-indexes came in weaker than initially thought.

The consumer expectations sub-index stood at 79.9, below the preliminary reading of 82.3 and compared to July's 90.5. Meanwhile, the gauge for current economic conditions came in at 105.3, below the flash estimate of 107.4 and compared to the previous month's final figure of 110.7.

Inflation expectations for the year ahead was confirmed at 2.7 percent in August (vs July's 2.6 percent); and the 5-year outlook came in at 2.6 percent (vs July's 2.6 percent).

"The Consumer Sentiment Index posted its largest monthly decline in August 2019 (-8.6 points) since December 2012 (-9.8 points). The 2012 plunge reflected widespread fears of being pushed off the “fiscal cliff” due to rising taxes and falling government spending. The recent decline is due to negative references to tariffs, which were spontaneously mentioned by one-in-three consumers. Unlike concerns about the fiscal cliff, which were promptly resolved, Trump’s tariff policies have been subject to repeated reversals amid threats of higher future tariffs. Such tactics may have some merit in negotiations with China, but they act to increase uncertainty and diminish consumer spending at home. Unlike the repeated tariff reversals, negative trends in consumer sentiment cannot be easily reversed. The data indicate that the erosion of consumer confidence due to tariff policies is now well underway. Compared with those who did not reference tariffs, consumers who made spontaneous negative references to tariffs also voiced higher year-ahead inflation expectations, more frequently expected rising unemployment, and expected smaller annual gains in household incomes (see the chart). While the overall level of sentiment is still consistent with modest gains in consumption, the data nonetheless increased the likelihood that consumers could be pushed off the “tariff cliff” in the months ahead.", Surveys of Consumers chief economist, Richard Curtin, said.

US Consumer Sentiment Revised Lower to Near 3-Year Low

University of Michigan | Joana Ferreira |
8/30/2019 2:07:44 PM