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US consumer sentiment improves in September

By Michele Maatouk

Date: Friday 13 Sep 2019

(Sharecast News) - US consumer sentiment improved in September, according to preliminary figures released by the University of Michigan on Friday.
The consumer sentiment index rose to 92.0 from a three-year low of 89.8 in August, beating expectations for a reading of 90.9. However, it was down from 100.1 in September last year.

The index of current economic conditions ticked up to 106.9 this month from 105.3 in August but was below last September's reading of 115.2.

The index of consumer expectations, meanwhile, rose to 82.4 from 79.9 but was down from a reading of 90.5 in September 2018.

Surveys of Consumers chief economist Richard Curtin said consumer sentiment in September marked the third lowest level since President Trump's election.

"While the uptick was across both current and expected economic conditions, the early September rebound was not widespread across age or income subgroups as it only fell among consumers under age 45 and among households with incomes in the top third - these two groups account for about half of all spending.

"The data do indicate that consumers anticipate that the Fed will cut interest rates next week, with net declines in interest rates more frequently expected at present than any time since the depths of the Great Recession in February 2009. These expectations are likely to diminish the impact on spending from a quarter-point rate cut, but if rates remain unchanged, it may increase negative reactions by consumers."

Curtin said concerns about the impact of tariffs on the domestic economy also rose in early September, with 38% of all consumers making spontaneous references to the negative impact of tariffs, the highest percentage since March 2018.

"Those who negatively mentioned tariffs also held more negative views on the overall outlook for the economy as well as anticipated higher inflation and unemployment in the year ahead."

Pantheon Macroeconomics said the trend is softening and this is likely due to the trade war between the US and China.

"Both the expectations and current conditions indexes rose, by 2.5 and 1.4 points respectively, but note these gains reversed only a small part of the August drop. Both measures remain high by historical standards, but they are off their highs. The current conditions index is now clearly trending downwards, even though jobless claims, which usually drive the index, remain at their cycle low.

"The trade war, both directly and via its impact on the stock market, presumably is to blame, so it's hard to see much chance of a rebound anytime soon. Expectations remain elevated, relative to movements in gas prices and the stock market - the usual drivers - but the overshoot compared to our model, which emerged immediately after the 2016 election, is narrowing. The Trump premium in the confidence data is fading; we expect it to disappear by the end of the year as the tariffs on consumer goods bite."

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