At 92.1, US consumer sentiment at Michigan University (1st publication for August) was significantly weaker than expected (forecast was 97.2; previous month was 98.4). This is the weakest figure since the beginning of the year! The reason for this is the further tariffs against China starting in September. („Consumers strongly reacted to the proposed September increase in tariffs on Chinese imports, spontaneously cited by 33% of all consumers in early August“)
The assessment of the current situation is 107.4 – the worst value since the end of 2016 (forecast was 110.4; previous month was 110.7).
Consumer expectations are at 82.3 (forecast was 89.0; previous month was 90.5).
Richard Curtin, who supervises the survey, writes about this:
„Consumer sentiment declined in early August to its lowest level since the start of the year. The early August losses spanned all Index components. Although the Expectations Index recorded more than twice the decline in August as the Current Conditions Index (-8.2 versus -3.3), the Current Conditions Index fell to its lowest level since late 2016. Monetary and trade policies have heightened consumer uncertainty—but not pessimism—about their future financial prospects. Consumers strongly reacted to the proposed September increase in tariffs on Chinese imports, spontaneously cited by 33% of all consumers in early August, barely below the recent peak of 37%. Although the announced delay until Christmas postpones its negative impact on consumer prices, it still raises concerns about future price increases. The main takeaway for consumers from the first cut in interest rates in a decade was to increase apprehensions about a possible recession. Consumers concluded, following the Fed’s lead, that they may need to reduce spending in anticipation of a potential recession. Falling interest rates have long been associated with the start of recessions—see the featured chart. Perhaps the most important remaining pillar of strength for consumer spending is favorable job and income prospects, although the August survey indicated some concerns about the future pace of income and job gains. It is likely that consumers will reduce their pace of spending while keeping the economy out of recession at least through mid 2020.“