Consumer Sentiment Sags Again in August

100267991After an unexpected jump to a six-year high 85.1 in July, the Thomson Reuters/University of Michigan consumer sentiment index fell back to earth on Friday. The final index reading for August came in at 82.1, still well above expectations for a final reading of 80.5. The mid-month preliminary reading came in at 80.0.

Contrary to evidence released in this morning's report on personal income and spending, some consumers are expecting income gains. Unfortunately, households with incomes below $75,000 are less sanguine about their prospects and they pushed the subindex on consumer expectations down, from 76.5 in July to 73.7 in August. Rising interest rates also figured into consumers' outlook, especially as interest rates push up mortgage borrowing costs.

On the current economic conditions subindex, sentiment fell from 98.6 in July to 95.2 in August.

The last two weeks of August cushioned the blow delivered in the first two weeks of the month, which could be an positive signal for September. There are plenty of reasons to think that is overly optimistic. First, a potential military conflict in Syria could chill consumer sentiment. More important, perhaps, is that the U.S. debt ceiling is set to be reached in mid-October and we can expect more news coverage of an event that nearly drove the U.S. into default in 2011. The annual peak for consumer sentiment could well be behind us.


Filed under: Economy

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