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US consumer sentiment dips in July amid trade war woes

By Michele Maatouk

Date: Friday 13 Jul 2018

(Sharecast News) - Consumer sentiment in the US deteriorated in July amid trade war concerns, according to a preliminary reading from the University of Michigan.
The consumer sentiment index fell to 97.1 from 98.2 in June, below expectations for an unchanged reading but up from 93.4 in July 2017.

Meanwhile, the current economic conditions index printed at 113.9 in July from 116.5 the month before and 113.4 in the same month a year ago.

The index of consumer expectations ticked up to 86.4 in July from 86.3 in June and 80.5 in July last year.

Survey of Consumers chief economist Richard Curtin said: "Consumer sentiment slipped in early July but remained nearly equal to the average in the prior twelve months (97.7) and since the start of 2017 (97.4). The continuing strength has been due to favourable job and income prospects, with consumers under age 45 anticipating the largest income gains since July 2000. So far, the strength in jobs and incomes has overcome higher inflation and interest rates.

"The darkening cloud on the horizon, however, is due to rising concerns about the potential negative impact of tariffs on the domestic economy. Negative concerns about the impact of tariffs have recently accelerated, rising from 15% in May, to 21% in June, and 38% in July. Among those in the top third of the income distribution (who account for half of consumer spending), 52% negatively mentioned the impact of tariffs on the economy in early July. The primary concerns expressed by consumers were a decline in the future pace of economic growth and an uptick in inflation."

Andrew Hunter, US economist at Capital Economics, said given the continued strength of labour market conditions, trade fears could explain some of the decline in the current conditions index.

"But with the expectations index edging slightly higher, presumably helped by the recent drop in gasoline prices and resilience of the stock market, this suggests that most households aren't yet too concerned. On past form, the expectations index remains at a level consistent with very strong consumption growth. That relationship appears to have broken down more recently, but there are plenty of other reasons to expect the recent acceleration in household spending growth to continue."

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