Consumer Sentiment Misses Expectations, Nears Sept. 2017 Lows

Consumer sentiment – at least as measured by one gauge – has hit a low not seen in almost a year.

As noted by CNBC on Friday (Aug. 17), the University of Michigan’s initial reading of consumer sentiment, via its index, hit 95.3 this month. That preliminary reading missed the 98 that economists had projected, according to Reuters’ polling. The number also compares unfavorably to the 97.1 reading seen in July.

The reading comes against a backdrop where the Federal Reserve has boosted rates twice in 2018, and where some observers expect there to be two additional rate hikes. Those observations come from the CME Group’s FedWatch, where expectations are at 93.6 percent for a rate hike next month, and 61.3 percent for December.

Rate hikes, of course, are tied to expectations of – and generally are attempts to blunt – inflation. Inflation, in turn erodes buying power. In July, the Consumer Price Index (CPI) showed its largest increase in roughly a decade.

CNBC reported that the last time the reading was near those levels was September of 2017. Along with the report, Richard Curtin, who serves as chief economist of the University of Michigan’s Surveys of Consumers, said the latest tally showed “much less favorable assessments of buying conditions, mainly due to less favorable perceptions of market prices.” In one example, the economist stated that consumers viewed buying conditions for vehicles less favorably than throughout the past four years, as “vehicle prices [are] being judged less favorably than anytime since the close of 1984.”

Separately, Bloomberg reported that there also remained lingering concerns over trade wars. Additionally, home buying was viewed with less favorable sentiment that had been seen in a decade. The inflation rate over the next five to 10 years is seen at 2.5 percent versus a previous 2.4 percent.