US Consumer Sentiment Revised Lower in June



The University of Michigan's consumer sentiment for the US stood at 98.2 in June 2018, compared with a preliminary reading of 99.3 and slightly above May's 98. Both consumer expectations and current economic conditions came in weaker than initially thought.

The gauge measuring consumer expectations dropped to 86.3 in June (vs preliminary 87.4) from 89.1 in the previous month. Meanwhile, the current economic conditions sub-index rose to 116.5 (vs preliminary 117.9) from May's final reading of 111.8.

Inflation expectations for the year ahead rose to 3 percent in June from 2.8 percent in May, above a preliminary 2.9 percent. The 5-year outlook for inflation increased to 2.6 percent from 2.5 percent.

"Consumer sentiment retreated in late June to just above the May reading largely due to concerns about the potential impact of tariffs on the domestic economy. The falloff in confidence was minor, as the Sentiment Index has been virtually unchanged for the past three months. The persistent strength has been due to favorable assessments of jobs and incomes. While consumers anticipated rising interest rates during the year ahead, those expected increases were associated with a modest decline in longer term prospects for the national economy. For the year ahead, consumers still anticipated that the economy would produce small additional declines in the unemployment rate as well as higher wage gains. Consumers also anticipated an uptick in inflation during the year ahead, partly due to rising energy prices and partly due to tariffs. 

The potential impact of tariffs on the domestic economy was spontaneously cited by one-in-four consumers, with most expecting a negative impact on the domestic economy (21% out of 26%). The primary concerns were a downshift in the future pace of economic growth and an uptick in inflation. A longstanding belief of consumers is that trade with other countries results in a broader range of available goods at lower prices. When asked in a recent survey about their views on international trade, two-thirds of consumers thought that more trade with other countries would be better for the domestic economy (see the chart). To be sure, consumers' judgements about the impact of higher tariffs will not crystalize until they gain more experience with actual changes in product prices and domestic employment. While tariffs may have a direct impact on only a very small portion of overall GDP, the negative impact could quickly generalize and produce a widespread decline in consumer confidence.", Surveys of Consumers chief economist, Richard Curtin, said.

US Consumer Sentiment Revised Lower in June


University of Michigan | Joana Ferreira | joana.ferreira@tradingeconomics.com
6/29/2018 2:15:18 PM