University of Michigan consumer confidence falls to five-month low

The latest data on Friday, July 16 showed that the preliminary U.S. consumer confidence index of the University of Michigan in July unexpectedly fell to a five-month low, recording 80.8 as the lowest since February this year, much weaker than the 86.5 expected by economists and the previous value of 85.5 in June.

This indicates that U.S. consumer confidence fell significantly during the statistical period in early July and remains at depressed levels compared to the pre-epidemic period, a figure that had recorded a stage high of 101 in February 2020 and the second highest in June since the outbreak in March last year.

On the sub-data side.

The preliminary July reading of the Current Conditions Index, which measures consumers’ judgment of current financial conditions and economic outlook, fell to 84.5, sharply weaker than the expected 91 and the previous June reading of 88.6 and the lowest since last August.

Reflecting respondents’ assessment of the prospects for the next six months, the preliminary July index fell to 78.4, also significantly weaker than the expected 85 and 83.5 in June, and hit a five-month low.

The analysis pointed out that Americans’ concerns about price spikes in the near term have significantly affected consumer confidence data.

In the much-anticipated inflation expectations, the

Surveyed U.S. consumers’ short-term inflation expectations for the coming year initially stood at 4.8% in July, well ahead of expectations of 4.3%, the highest in 13 years since August 2008 and surpassing the ten-year peak set by the previous value of 4.6% in May.

U.S. consumers’ five-year inflation expectations were 2.9 percent in July, up from 2.8 percent in June, and continued to be lower than the 3 percent in May, indicating that Americans are more optimistic about longer-term price trends than in the short term.

Richard Curtin, the economist in charge of the survey, said inflation has put greater pressure on living standards, especially for low- and middle-income households, and has led to the postponement of a large number of discretionary purchases, especially among higher-income households.

At the same time, consumer attitudes toward purchasing cars, homes and durable goods fell to a thirty-year low since 1982, with only 30 percent of consumers reporting favorable home buying conditions, also the lowest level since September 1982.

Richard Curtin noted that U.S. consumers’ complaints about rising prices for cars, homes and household durable goods are at an all-time high, and measures of durable goods purchase plans have fallen to their lowest since the height of the epidemic last April. Seventy-one percent of them cited high home prices as an impediment to an optimistic assessment of their home buying situation, the highest percentage on record.

Another inflation gauge released earlier in the week showed that the New York Fed found in its latest survey that inflation expectations for the coming year soared to 4.8 percent, a record high on record, according to Zerohedge, a financial blog known for its venom. These inflation figures, which are surprisingly modest, all seem to indicate that high inflation is not simply the result of temporary factors.

Fed Chairman Jerome Powell repeatedly reiterated during his semiannual congressional hearings this week that high inflation could continue for a few more months, but would eventually fall back to near the long-term target of 2%.

Notably, Powell gave the criteria for judging the risk of inflation: “He would only worry about inflation if large price increases became more common.” Some analysts say that if the Fed really adheres to this principle, it will be too late; although Powell said that “if inflation expectations get out of control, the Fed will react”, but also did not provide much detail.

After the release of the data, the Dow maintained its intra-day decline of more than 100 points, and all three major U.S. stock indexes turned lower. 10-year U.S. bond yields moved up more than 2 basis points during the day, back to 1.32%, but still close to a one-week low.