U.S. consumer sentiment declines to lowest in almost a year

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(Aug 17): U.S. consumer sentiment unexpectedly fell to the lowest level in almost a year, amid less favourable views on purchasing big-ticket items and persistent concerns about trade tensions, a University of Michigan report showed Friday.

Highlights of Michigan Sentiment (August, Preliminary)

Sentiment index decreased to 95.3 (est. 98) from prior month’s 97.9; lowest since September, below all analyst estimates.

Current conditions gauge, which measures Americans’ perceptions of their finances, fell to 107.8 from 114.4 in July; 6.6-point drop is biggest since August 2011.

Expectations measure unchanged at 87.3.

Expected change in prices during the next year unchanged at 2.9%.

Key Takeaways

Consumers showed a broad drop in confidence about major purchases, a possible caution signal for spending, following strong gains in the second quarter, with the decline in the main sentiment gauge concentrated among households in the bottom third of incomes. 

Buying conditions for large household durable goods slipped to the lowest level in almost four years, vehicle-buying views were the least favourable since 2013, and home-buying conditions were seen less favourably than any time in about a decade.

Respondents also continued to express concern about how trade tensions may affect the economy. Negative references to levies remained widespread, with 32% citing unfavourable references to the trade policy in early August, according to the report, following 35% in July.

The decline in the Michigan gauge compares with more-favourable sentiment figures in recent releases on the Bloomberg Consumer Comfort Index and the Conference Board’s confidence measure.

Official’s View

“Consumers voiced the least favorable views on pricing for household durables in nearly ten years,” Richard Curtin, director of the University of Michigan consumer survey, said in a statement. 

“The recent favourable GDP report had only a small positive impact on growth prospects for the economy and on unemployment expectations.”

Consumers are realizing the trade situation may prove to be “a long, drawn-out affair,” Curtin said in a conference call, following the release of the report.

Other Details

Personal finance views remained “very favourable” as 53% of households cited recent financial gains.

Inflation rate over next five to 10 years seen at 2.5%, from 2.4% the prior month.