The University of Michigan Consumer Sentiment Index rose slightly month over month from a final July reading of 72.5 to August’s preliminary level of 72.8. Economists polled by Bloomberg were expecting a preliminary August reading of 71.9. The final index reading in August of last year was 89.8.
Month over month, consumer sentiment fell by 0.3 index points. The month-over-month percentage increase in the score was 0.4% and the year-over-year decline was 18.9%.
The consumer expectations subindex increased by 0.6 points month over month, from 65.9 to 66.5 (up 0.9%), while the current conditions subindex fell from 82.8 to 82.5 (down 0.4%).
Year over year, the current conditions subindex fell by 21.7% and the consumer expectations subindex dropped by 16.8%.
The survey’s chief economist, Richard Curtin, noted increased pessimism among consumers for the next five years combined with an improvement in current buying conditions. Low interest rates favor buying, especially for homes, but that is offset by a weak outlook for policy solutions from Washington.
Curtin also commented, “The overall confidence in economic policies fell to the lowest level since Trump first entered office.” The inability of the federal government to construct a policy to combat the effects of the COVID-19 pandemic has increased uncertainty among consumers who are saving more “to offset lapses in economic relief programs and to hedge against fears about the persistence and spread of the coronavirus as the school year gets underway.”
Curtin also noted “bad economic times” for more than just the next year. Consumers do not expect sustained growth in the U.S. economy over the next five years.
Consumers also are projecting a slowdown in employment growth and rising inflation over the next year.
Earlier Friday morning, the Census Bureau reported that retail sales grew by 1.2% month over month in July, far more slowly than an 18.2% jump in May and an 8.4% boost in June.
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