US consumer sentiment steady in August
Consumer sentiment in the US was broadly stable in August as Americans remained concerned about the Covid-19 pandemic and the impact on the economy, according to preliminary data released on Friday.
The University of Michigan consumer sentiment index nudged up to 72.8 from 72.5 in July, but was down from last August’s reading of 89.8.
The current economic conditions index printed at 82.5 in August from 82.8 the month before and versus 105.3 in August last year.
The index of consumer expectations came in at 66.5 compared to 65.9 in July and 79.9 in August 2019.
Surveys of Consumers chief economist, Richard Curtin, said two significant changes since April have been that consumers have become more pessimistic about the five-year economic outlook and more optimistic about buying conditions.
"Lower interest rates by the Fed prompted more favourable buying, especially for homes, and the DC policy gridlock was responsible for the weaker outlook. The overall confidence in economic policies fell to the lowest level since Trump first entered office," said Curtin.
"Bad economic times are anticipated to persist not only during the year ahead, but the majority of consumers expect no return to a period of uninterrupted growth over the next five years. Consumers anticipate declines in the national unemployment rate to significantly slow and expect a rising rate of inflation during the year ahead. While a positive growth rate in consumption is anticipated in the 2nd half of 2020, it will hardly herald the end of the coronavirus recession."
Michael Pearce, senior US economist at Capital Economics, said: "We had expected the expiry of unemployment benefits to push confidence lower, and the details of the report did suggest that confidence in the government’s economic policy sunk further in August. But that was more than offset by other factors, presumably reflecting the more positive news on the virus, with the number of new cases now falling nationwide, as well as the stock market, with the S&P 500 closing in on a record high.
"Elsewhere, consumers’ inflation expectations - both one and five years ahead - rose in the initial stages of the pandemic, but have been relatively stable since, with expected inflation in five years’ time at 2.7%, the same as it was in May. The bottom line is that there is little here to sway policymakers in either direction."