Consumer confidence in the United States has reached its lowest level since October 2014, experts say.
The University of Michigan’s consumer sentiment index (MCSI), which quantifies consumer expectations regarding the economy, decreased to 87.2 in September, reporting a 4.7 drop since August. The current MCSI is still higher than the one recorded last year, when consumer confidence stood at just 84.6.
Overall, the recent drop is smaller than anticipated, given that economists had predicted that consumer sentiment would be at 86.2 by the end of September. Moreover, it appears that the index has stabilized itself to some degree, given that it was at 85.7 earlier this month, in the preliminary report.
The MCSI is established following telephone surveys, and an initial value, which assesses 60% of the total results, is released around the 10th of each month. The final value, which takes into account all the results, is made public following each month, and gives investors an insight into the consumers’ willingness to spend money
According to representatives of the University of Michigan, the expectations index, which measures consumer sentiments regarding the short-term future of the economy, has experienced a rise, from 76.4 to 78.4.
Similarly, the present situation index, which assesses consumer attitude toward the current state of the economy, rose from 100.3 to 101.2.
A possible explanation could be that Americans have become more optimistic regarding national economy, although they maintain fears regarding economic conditions in China and Europe.
“Consumers increasingly concluded that the stock market declines had more to do with international conditions than the domestic economy”, declared Richard Curtin, chief economist at Michigan’s Survey of Consumers.
It is believed that consumer spending is finally making a recovery, due to faltering gas prices and strengthening job and housing markets. As the U.S. government has reported, unemployment has reached a seven-year low of 5.1% in August, and the GDP grew at a 3.9% annual pace between April and June.
In January, consumer sentiment had reached an 11-year peak of 98.1, after having dipped to 55.3 in November 2008 due to the recession.
Afterwards however, the MCSI experienced a sharp drop at the beginning of September, as a result of pronounced stock market volatility and an abrupt slowdown in hiring. However, it appears that now expectations of the future are leveling off, and may soon witness an upward trend.
On the other hand, readings related to inflation expectations remained steady, in comparison with last month. Surveyed subjects estimated that prices would rise by 2.9% in the next year, while inflation expectations for the coming 5 to 10 years were at 2.8%.
So far, inflation has been curbed thanks to a strong national currency and a drop in oil prices, but rates may rise by the end of the year, as the economy heals.
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