U.S. Consumer Sentiment Improves But Still Shows ‘Slow Erosion’

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(Bloomberg) — U.S. consumer sentiment improved in late September while remaining subdued after an August plunge, reflecting persistent unease over trade tensions and global risks confronting the economy.

The University of Michigan’s final sentiment index rose to 93.2 from a preliminary 92 and August’s 89.8, according to data Friday that topped economist estimates. The gauges of current conditions and economic expectations index both showed gains from the first report, as did views on buying conditions for durable goods.

Key Insights

  • The final reading for the month, while up from the lowest level in almost three years, signals that consumers may be poised to offer the expansion less of a boost than they have in recent quarters despite a still-solid job market.
  • A near-record one-third of respondents made a negative mention of trade policies when asked to explain their economic expectations, according to the report. In addition, fewer Americans saw wages rising or unemployment falling in the year ahead.
  • Government data Friday showed the economy cooled in August. Consumer spending, which accounts for about two-thirds of gross domestic product, rose 0.1% from July, the smallest gain in six months and less than economists had projected.
  • Other surveys have showed views dimming. The Conference Board’s consumer confidence measure dropped the most this year in September while Bloomberg’s comfort gauge fell for a third straight week as views of the buying climate deteriorated.

“ The overall trends in the sentiment index remain quite favorable, but show signs of a slow erosion,” Richard Curtin, director of the University of Michigan consumer survey, said in a statement. “ Some of these concerns are rooted in partisanship, some due to conditions in the global economy.”

  • The survey’s gauges of inflation expectations, which Federal Reserve officials monitor closely, showed price gains over the coming year were seen at 2.8% versus 2.7% the prior month. The five-year estimate was 2.4% following 2.6%.
  • Economists had expected a final sentiment reading of 92.1.
  • A measure of buying conditions for household durable goods remained near last month’s five-year low, though was up from August after the preliminary report showed a decline.
  • Interviews were conducted Aug. 27 to Sept. 23. The cutoff for the preliminary survey was Sept. 11.
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