US May Consumer Sentiment Revised Lower
The University of Michigan's consumer sentiment for the US was revised lower to 100 in May 2019 from a preliminary 102.4, missing market expectations of 101.5. It was the highest reading since September last year, as confidence remained at very favorable levels, still significantly eroded in the last two weeks of May due to unfavorable references to tariffs.
5/31/2019 2:18:57 PM
The consumer expectations sub-index came in at 93.5, below the preliminary reading of 96.0 and compared to April's 87.4. Also, the gauge for current economic conditions came in at 110, below the flash estimate of 112.4 and the previous month's final figure of 112.3. Inflation expectations for the year ahead rose to 2.9 percent in May (vs a preliminary 2.8 percent), compared to the prior's month 2.5 percent; and the 5-year outlook increased to 2.6 percent, unrevised from early estimates and against April's 2.3 percent.
"Although consumer sentiment remained at very favorable levels, confidence significantly eroded in the last two weeks of May. The late-month decline was due to unfavorable references to tariffs, spontaneously mentioned by 35% of all consumers in the last two weeks of May, up from 16% in the first half of May and 15% in April and equal to the peak recorded last July in response to the initial imposition of tariffs. The year-ahead inflation expectations jumped to 2.9% in May up from last month’s 2.5%. Year-ahead inflation expectations among those who unfavorably mentioned tariffs was 0.5 percentage points higher than those who made no references to tariffs. Importantly, the gain in inflation expectations was recorded prior to the actual increases in consumer prices due to the most recent hike in tariffs. While higher inflation expectations modestly reduced real income expectations, the largest impact was on buying conditions for appliances and other large household durables, which fell to their lowest level in four years. The combination of higher inflation and a slower pace of spending provide conflicting signals for monetary policy. The divergence will further widen if, as is likely, the trade war escalates. Will the Fed risk higher inflation by lowering interest rates, or risk higher unemployment by raising interest rates? This delimma comes at a time when consumers have expressed the highest level of confidence since 2002 in the government’s ability to keep both inflation and unemployment at reasonably low levels. Consumers now judge economic security more important than a faster pace of growth in their personal incomes or household wealth.", Surveys of Consumers chief economist, Richard Curtin, said.