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U.S. Consumer Sentiment Falls Most Since 2012 on Trade Fears

U.S. Consumer Sentiment Falls Most Since 2012 on Tariff Concern

(Bloomberg) -- U.S. consumer sentiment fell the most in six years, slumping to the lowest level of Donald Trump’s presidency as Americans expressed concern about how his tariffs will affect the economy.

The University of Michigan’s final sentiment index fell to 89.8 in August from a previously reported 92.1 and 98.4 in July, data showed Friday. The gauge of current conditions dropped to the lowest since October 2016, while the expectations index matched January as the weakest since that same period.

The data follow somewhat mixed consumer sentiment readings. The Conference Board’s confidence measure eased in August but posted the best assessment of current conditions since 2000. Bloomberg’s weekly comfort gauge rose for a second week, while the monthly expectations saw more Americans reporting the economy’s getting worse.

Separately Friday, data showed U.S. personal spending accelerated more than expected in July, indicating household consumption remained solid at the start of the third quarter.

U.S. Consumer Sentiment Falls Most Since 2012 on Trade Fears

Key Insights

  • The increasingly downbeat mood suggests growing concern about trade policy uncertainty and a potential economic downturn are weighing on attitudes. Sentiment may face further headwinds as the trade war with China escalates, with additional tariffs set to go into effect Sept. 1.
  • The 8.6-point drop from July was the largest since December 2012, while the 89.8 reading for the sentiment index was the lowest since October 2016.
  • Buying attitudes toward appliances, home electronics and other household durable goods fell to a five-year low on tariff concerns. Attitudes toward buying vehicles were the dimmest since 2013, with references to high prices reaching the highest since 1997, according to the report.

Official’s View

“The recent decline is due to negative references to tariffs, which were spontaneously mentioned by one in three consumers,” Richard Curtin, director of the University of Michigan consumer survey, said in a statement. “ Trump’s tariff policies have been subject to repeated reversals amid threats of higher future tariffs. Such tactics may have some merit in negotiations with China, but they act to increase uncertainty and diminish consumer spending at home.”

What Bloomberg Economists Say

“A slew of negative news, including the escalation of U.S.- China trade tensions and ensuing market volatility likely weighed on the index. Deterioration in sentiment, along with deceleration in personal income growth, if sustained, will likely weigh on consumer spending in the second half of the year.”

--Yelena Shulyatyeva, economist

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  • The economic outlook for the next 12 months fell to the lowest since January, while the five-year outlook also tumbled.
  • Views of expectations for personal finances plunged more than previously reported from a July level that was the highest since 2003. Attitudes on the current situation also fell.
  • Consumer expectations for inflation edged up, with price gains over the coming year rising to 2.7% from 2.6% in July. Five-year estimates were up to 2.6% after 2.5% the prior month.
  • A measure of home buying attitudes remained near recent lows.
  • Economists had expected an upward revision to the sentiment measure to 92.4.
  • Interviews were conducted July 31 to Aug. 26.

To contact the reporter on this story: Reade Pickert in Washington at epickert@bloomberg.net

To contact the editors responsible for this story: Scott Lanman at slanman@bloomberg.net, Jeff Kearns, Vince Golle

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