The University of Michigan Consumer Sentiment Index for August was revised down to 89.8 (previously 92.1) and was the lowest since 87.2 in October 2016. The survey noted that the 8.6 point month-over-month decline was the largest since December 2012 when it fell 9.8 points as consumers faced worries about the effects of the so-called “fiscal cliff”. This time around it appears that erratic talk about trade policy and its possible impacts on the expansion are driving consumers’ optimism down, essentially wiping out the improvement in sentiment that greeted the November 2016 election results and held at high levels in 2017 and 2018.
The index for current conditions was revised down to 105.3 (previously 107.4) in spite of the strength in the labor market. Confidence in the present hasn’t been this low since 103.2 in October 2016. The index for six months from now was also revised down to 79.9 (previously 82.3) and was the lowest since 79.9 in January when the partial federal government shutdown combined with a slowing in economic growth to make the near future look gloomier. Prior to that, the lowest was 76.8 in October 2016.
The measures of inflation expectations were unrevised from the preliminary report. One-year expectations were at 2.7%, up a tenth from July but in line with the middle of the range of the past year. Five-year inflation expectations were 2.6%, also up a tenth from the prior month and resting at the high end of readings over the past year. While inflation expectations remain low, these do not suggest that the FOMC needs to be concerned about the credibility of its 2% inflation objective.
Disclaimer: Whetstone Analysis provides commentary as a service to its subscribers. Whetstone Analysis is not responsible for, and expressly disclaims all liability for, damages of any kind arising out of use, reference to, or reliance on any information contained within the site. While the information contained within the site is periodically updated and every effort is made to ensure its accuracy, no guarantee is given that the information provided in this Web site is correct, complete, and up-to-date. Click here to read our full Disclaimer.