U.S. Consumer Sentiment Falls to Six-Month Low on Trade Concern

(Bloomberg) -- U.S. consumer sentiment fell to a six-month low in July amid concern over trade tensions, a University of Michigan report showed Friday.

Highlights of Michigan Sentiment (July, final)
  • Sentiment index eased to 97.9 (est. 97.1) from prior month’s 98.2; preliminary reading was 97.1
  • Current conditions gauge, which measures Americans’ perceptions of their finances, fell to 114.4 from 116.5 in June
  • Expectations measure increased to 87.3 from June’s 86.3
  • Five-year inflation expectations dropped to 2.4%, just above the quarter-century low of 2.3%, from 2.6%

Key Takeaways

While sentiment remains high by historical standards, uncertainty surrounding trade has strained confidence as Americans fear economic fallout from the tariffs and potential inflation. Still, lower taxes and favorable job and income prospects cushioned trade worries as the economy continues to grow. Data released Friday showed the expansion accelerated to a 4.1 percent pace of growth in the second quarter, the fastest since 2014.

What's more, there were signs of easing tensions this week as President Donald Trump made peace with the European Union and signs mounted that a tentative deal on a new Nafta may be reached next month.

Official's View

“Consumers who had negative concerns about the tariffs voiced much more pessimistic economic outlook,” Richard Curtin, director of the University of Michigan consumer survey, said in a statement. “These negative economic expectations could quickly disappear if the trade issues with Europe are promptly settled and immediately followed by agreements with China, Canada, and Mexico.”

Other Details
  • Year-ahead inflation expectations edged down to 2.9 percent after 3 percent the prior month
  • Vehicle buying plans posted a significant decline in July, falling to the lowest level in five years
  • Consumers' assessment of vehicle prices was the weakest since early 1997 “partly due to fears of tariffs,” the report said

©2018 Bloomberg L.P.