On a rather grey Friday, the final results from the University of Michigan’s September consumer sentiment survey made their debut. The outcome, alas, was not quite the sunny disposition many had envisaged.
The consumer sentiment index slipped to a modest 55.1. This was below the 55.4 forecasted by the economists at Bloomberg and considerably less than the 58.2 of August, let alone the 70.3 from the previous year.
A spot of preliminary insight on 12th September had already indicated that American consumers were feeling a bit glum about the economy. Joanne Hsu, the director of the University of Michigan’s consumer surveys, mentioned concerns about the impacts of Trump’s tariffs.
“This month’s conversations reveal consumers are feeling the pinch from the threat of rising inflation and the possibility of a lacklustre labour market,” she noted on Friday. A notable 44% expressed frustration that elevated prices were nipping away at their finances, marking the highest reading in a year.
Interestingly, there were nuances in the survey results. Consumers holding more substantial stock holdings exhibited steady sentiment in September. Conversely, those with fewer or no holdings experienced a dip in sentiment.
Politically, sentiment shifted as well—declining by about 9% for independents and 4% for Republicans. However, Democrats experienced an uplift.
Conversely, when pondering inflation, there was a silver lining. Americans’ year-ahead inflation expectations dropped to 4.7% in September, slightly below last month’s 4.8%. Economists had expected it to remain unchanged. Long-term expectations for the next five to ten years nudged up to 3.7% from August’s 3.5%, but that was still less than the 3.9% economists had projected.
The narrative unfolded shortly after the Fed’s cherished inflation indicator, the Personal Consumption Expenditures (PCE) price index, showed a gentle easing of “core” inflation in August. This encouraged traders to hold onto hopes of a Fed rate cut come October’s meeting.
With all this in play, it’s clear the economic landscape remains as unpredictable as English weather, where a brolly is always advisable.
