US Consumer Confidence Unexpectedly Dips in July as Expectations Lower

Talking Points:

• Consumer confidence read in at 95.3, missing both the estimated 98 and last month’s reading of 97.9
• Expectations of consumers dipped 6.8 points to 107.8, down 5.8% from June
• Pricing concerns are weighing on many respondents as they see many goods priced unfavorably

After a relatively quiet week for economic data, the last major piece slipped to its lowest level since last September. Falling to 95.3, University of Michigan’s consumer confidence index missed the forecasted reading of 98 and June’s measure of 97.9. Year-over-year, the index has fallen -1.5%. The survey of current economic conditions also fell, down 6.8 points to 107.8 with a month-to-month change of -5.8%. While the aggregate and conditions index fell, the index of consumer expectations remained steady at 87.3.

Richard Curtin, the survey’s curator, largely attributed the decline to less favorable assessments of buying conditions. Buying conditions for large household durables sank to the lowest in nearly four years and views on pricing for those durables fell to their lowest since 2008. Vehicle buying conditions also weighed on the index, with pricing levels seen less favorable than any time since 1984. Similarly, home pricing was judged as the worst since 2006.

The decline in many of the sectors is very surprising, considering last month’s strong performance. Overall, the report shows consumers are very sensitive to price changes even as inflation rests near the targeted 2.0%. The survey found consumers see inflation at the end of the year near 2.9%. To the benefit of the Fed, it seems interest rates will impact consumer spending more drastically moving forward. With that in mind, the Federal Reserve is due to release minutes next Wednesday, which could offer new insight on their stance regarding rate hikes. To see when other potentially market moving data is released this week, view our economic calendar.

Ongoing trade wars could also negatively impact pricing for consumers, as components for vehicles, household durables, and homes rise due to steel and aluminum tariffs. Further, any auto tariffs would likely receive a rebuke and undoubtedly push vehicle prices higher in the United States.

A Brief History of Trade Wars.

Despite the rather sharp decline in the index relative to recent readings, the dollar was not immediately impacted by the results. A more palpable decline in the dollar was seen after the release of positive Canadian CPI data Friday morning. The data helped move the dollar basket further from recent highs around 96.6. The basket now trades near 95.8.

US Dollar Basket (DXY) 10-Minute Price Chart, August 17

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