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Bad surprise

09/26/2019 | 10:35am

US consumer sentiment declined sharply in September, faster than was expected by analysts. The Conference Board index, which measures it, fell to 125.1 from 134.2 in August, against a Reuters consensus of 133.5. This is another warning sign for investors, although some positive job data mitigates these figures.


This was not expected. Consumer sentiment in the United States deteriorated in September, more than expected, due to trade tensions between the United States and China, according to the Conference Board index released Tuesday. The index stood at 125.1 points compared to 134.1 in August (-9.1 points). For September, analysts expected 134 points.

"Consumers have been less positive about both their appreciation of the current economic situation and their expectations for the near-term outlook," said Lynn Franco, Director of Economic Indicators at the Conference Board, in a statement. The "escalation of trade tensions" between Beijing and Washington, which resulted in the imposition of new tariffs on September 1, "seems to have shaken consumers," she added.

The sharp fall in consumer sentiment may also reflect recent equity market volatility and a spike in gasoline prices. 

“The expectations component saw most of the damage, which is a little concerning. It posted its lowest reading since January when the US was in the midst of the last government shutdown. That said, the relationship between confidence and spending hasn’t been fantastic since President Trump won the 2016 election. Explaining this breakdown in the relationship is tricky. Indeed, we see less of a divergence between sentiment and spending when looking at the University of Michigan sentiment index,” ING says in an analysis.

However, looking on the bright side, it said that there are still reasons to be positive on the US consumer spending outlook. “Unemployment is at multi-decade lows while today’s Conference Board report showed more than 40% of respondents feel that there are plenty of jobs available. This gives a sense that there are opportunities for career progression or higher pay both inside and outside of your current employer. Pay rates are certainly accelerating while equities have recovered all their losses seen in August and mortgage rates have fallen by more than 100bp over the past year. This doesn’t point to an imminent downturn in spending.”




Romain Fournier
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