U.S. Consumer Sentiment Rebounds in September After Big Drop

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U.S. consumer sentiment rebounded in September after a steep drop, signaling that consumers may be poised to keep powering the economic expansion despite gathering uncertainties.

The University of Michigan’s preliminary sentiment index rose to 92 from a nearly three-year low of 89.8 in August, data showed Friday. Gauges of current conditions and expectations strengthened.

Key Insights

• The resilient reading shows American consumers may be poised to shake off trade war and global slowdown to support the record-long economic expansion as the labor market holds up. Data earlier Friday showed August retail sales topped estimates with a 0.4% monthly gain with July upwardly revised.
• Concerns about tariffs on the economy rose, with 38% of respondents making spontaneous references to the negative impact, the most since March 2018, according to the report. The reading for the first part of the month is the first since President Donald Trump increased tariffs on more Chinese goods Sept. 1.
• The Michigan data are consistent with the Bloomberg Consumer Comfort Index’s stabilization last week and the elevated reading for the Conference Board’s confidence gauge last month, when it was near the best level in 18 years.
• Federal Reserve policy makers, who cut interest rates in July for the first time in a decade, are projected to make a second-straight reduction at their meeting next week even as they have continued to characterize the job market as strong.

Official’s View

“The data do indicate that consumers anticipate that the Fed will cut,” Richard Curtin, director of the University of Michigan consumer survey, said in a statement. “While a recession is not anticipated in the year ahead, neither is a resurgence in personal consumption. The outlook for consumption is for a slower but positive growth, keeping the expansion going for another year.”

What Bloomberg Economists Say

“The rebound, however, was muted due to ongoing uncertainty. Still, the level of sentiment remains relatively high, bolstered by tight labor-market conditions. Strength in August retail sales also serves as a testament of consumer resilience.”

--Eliza Winger

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• Consumer expectations for inflation were mixed, with price gains over the coming year seen at 2.8%, up from 2.7%, while five-year estimates fell to 2.3%, matching the lowest in records to 1979. Those readings follow Labor Department data Thursday showing the core consumer price index, which excludes food and energy, rose 2.4% on an annual basis in August, the most in a year.
• A measure of buying conditions for household durable goods was little changed. The economic outlook for the coming year and next five years both firmed up, as did assessments of current and future personal finances.
• Consumer expectations for Democrats fell to one of the lowest levels on record and the weakest since monthly readings began in early 2017.
• Interviews were conducted Aug. 27 to Sept. 11.

To contact the reporter on this story: William Edwards in Washington at wedwards29@bloomberg.net

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

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