US July Consumer Sentiment Revised Higher


The University of Michigan's consumer sentiment for the US came in at a six-month low of 97.9 in July 2018, above the preliminary reading of 97.1 and little-changed from June's 98.2. Both consumer expectations and current economic conditions came in stronger than initially thought.

The current economic conditions sub-index declined to 114.4 in July (vs preliminary 113.9) from June's final reading of 116.5. Meanwhile, the gauge measuring consumer expectations rose to 87.3 (vs preliminary 86.4) from 86.3 in the previous month.

Inflation expectations for the year ahead eased to 2.9 percent in July from 3 percent in June. The 5-year outlook for inflation decreased to 2.4 percent from 2.6 percent in the previous period.

"Consumer sentiment posted a trivial 0.3 point one-month decline, remaining a half of an Index-point or less from the average in the prior twelve months (97.7) or since the start of 2017 (97.4). Despite the expectation of higher inflation and higher interest rates during the year ahead, consumers have kept their confidence at high levels due to favorable job and income prospects. This mix of positive and negative expectations is similar to past expansions, and, as in the past, it will prevail as long as increases in inflation and interest rate hikes remain modest. What is unique about the current situation is the potential impact of tariffs on the domestic economy. Concerns about tariffs greatly accelerated in the July survey. Across all households, 35% spontaneously mentioned that the tariffs would have a negative economic impact in July, up from 21% in June and 15% in May. Consumers who had negative concerns about the tariffs voiced a much more pessimistic economic outlook, had inflation expectations that were 0.6 percentage points higher than those who hadn't mentioned tariffs, and were more likely to anticipate that the unemployment rate would rise during the year ahead. Of course, these negative economic expectations could quickly disappear if the trade issues with Europe are promptly settled and immediately followed by agreements with China, Canada, and Mexico. Resolution is critical to forestall decreases in consumer discretionary spending as a precaution against a worsening economy.", Surveys of Consumers chief economist, Richard Curtin, said.

US July Consumer Sentiment Revised Higher


University of Michigan | Joana Ferreira | joana.ferreira@tradingeconomics.com
7/27/2018 2:08:39 PM