| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| Index | 71.2 | 70.5 to 71.2 | 69.5 | 71.2 |
| Year-ahead Inflation Expectations | 3.3% | 3.3% to 3.3% | 3.5% | 3.3% |
Highlights
The University of Michigan consumer sentiment index is down to 69.5 in the final August report after 71.6 in July. The final reading is a downward revision from the preliminary report. The index is below the consensus of 71.2 in the Econoday survey of forecasters. The index reflects downward revisions for both current conditions and expectations for six months from now. Despite the modest month-to-month decline, the index reading is the second highest since the all-time low of 50.0 in June 2022. Overall, consumers remain unconfident about the economy, but sentiment is recovering slowly, if unevenly.
The index for current conditions is at 75.7 in August after 76.6 in July. Greater uncertainty about the state of the US economy and rising gasoline prices cut into the rising trend for confidence in the present.
The six-month expectations index is down to 65.5 in August after 68.3 in July, nearly a full 3-point drop, but still above the June 2022 all-time low of 46.8. There may be less confidence that inflation will continue to drop and more worries about geopolitical events.
The 1-year inflation measure is up a tenth to 3.5 percent in August from 3.4 percent in July. This is not a large increase but it is now up for the second month in a row after moderating earlier in the year. The likely culprit is gasoline prices which can have an immediate impact on consumers' perceptions of inflation.
The 5-year inflation measure more in line with the Fed's medium term inflation horizon is unchanged at 3.0 percent in August and has only exhibited small one-tenth monthly moves for the past 11 months in a narrow range of 2.9 to 3.1 percent. This points to stability in inflation expectations that Fed officials will take into account in their monetary policy decisions.
The index for current conditions is at 75.7 in August after 76.6 in July. Greater uncertainty about the state of the US economy and rising gasoline prices cut into the rising trend for confidence in the present.
The six-month expectations index is down to 65.5 in August after 68.3 in July, nearly a full 3-point drop, but still above the June 2022 all-time low of 46.8. There may be less confidence that inflation will continue to drop and more worries about geopolitical events.
The 1-year inflation measure is up a tenth to 3.5 percent in August from 3.4 percent in July. This is not a large increase but it is now up for the second month in a row after moderating earlier in the year. The likely culprit is gasoline prices which can have an immediate impact on consumers' perceptions of inflation.
The 5-year inflation measure more in line with the Fed's medium term inflation horizon is unchanged at 3.0 percent in August and has only exhibited small one-tenth monthly moves for the past 11 months in a narrow range of 2.9 to 3.1 percent. This points to stability in inflation expectations that Fed officials will take into account in their monetary policy decisions.
Market Consensus Before Announcement
Consumer sentiment is expected to end August at 71.2, unchanged from August's mid-month flash with year-ahead inflation expectations also expected to be unchanged at 3.3 percent.
Definition
The University of Michigan's Consumer Survey Center questions households each month on their assessment of current conditions and expectations of future conditions. Preliminary estimates for a month are released at mid-month and are based on about 420 respondents. Final estimates are released near the end of the month and are based on about 600 respondents.
Description
The pattern in consumer attitudes and spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth.
This balance was achieved through much of the nineties and, in large part because of this, investors in the stock and bond markets enjoyed huge gains. It was during the late nineties that the consumer sentiment index hit its historic peak, reaching levels that were never matched during the subsequent 2001 to 2007 expansion nor during the long expansion following the Great Recession.
Consumer spending accounts for more than two-thirds of the economy, so the markets are always dying to know what consumers are up to and how they might behave in the near future. The more confident consumers are about the economy and their own personal finances, the more likely they are to spend. With this in mind, it's easy to see how this index of consumer attitudes gives insight to the direction of the economy. Just note that changes in consumer confidence and retail sales don't move in tandem month by month.
This balance was achieved through much of the nineties and, in large part because of this, investors in the stock and bond markets enjoyed huge gains. It was during the late nineties that the consumer sentiment index hit its historic peak, reaching levels that were never matched during the subsequent 2001 to 2007 expansion nor during the long expansion following the Great Recession.
Consumer spending accounts for more than two-thirds of the economy, so the markets are always dying to know what consumers are up to and how they might behave in the near future. The more confident consumers are about the economy and their own personal finances, the more likely they are to spend. With this in mind, it's easy to see how this index of consumer attitudes gives insight to the direction of the economy. Just note that changes in consumer confidence and retail sales don't move in tandem month by month.
