Broker Check

Consumer Sentiment Declines

September 16, 2019

US consumer sentiment declined to 89.8 in August according to the University of Michigan Index of Consumer Sentiment. The August number is an 8.7% decrease from the July level and is down over 10% from the high for the year. The last time consumer sentiment fell below the 90 level was nearly three years ago in October of 2016.

Consumer’s assessment of current economic conditions declined 9.3% from the start of 2019. This is the lowest level since late 2015. This shows that consumers fear that the rate of US economic growth may be declining making the economic conditions more challenging.

Meanwhile, the index of future economic conditions shows a similar dimming view of the future for US economic growth. Consumer outlook for the future declined 11.7% from July posting the lowest number since October of 2016.

Consumer spending represents nearly 70% of US economic growth. Therefore, any decrease in consumer’s views about the economy is scrutinized by economists and financial analysts alike. Should consumers become more pessimistic and cut back on spending it could cause a recession to become a self-fulfilling prophesy.

However, it should be noted that consumer views on the state of the economy has become a highly partisan issue in recent years with Republicans much more likely to be optimistic about current and future economic conditions while Democrats are far more likely to report a negative view. Therefore, the recent consumer sentiment data may be more of a reflection of the nation’s political leanings than is it an accurate reflection of consumer’s future spending patterns.