After reaching a six-year high in July, consumer confidence edged lower in August, according to the University of Michigan and Thomson Reuters. The Consumer Sentiment Survey’s index declined from 85.1 in July to a preliminary figure of 80.0 in August. (A final index number will be released on Friday, August 30.) Even with the decrease in August, the longer-term trend remains positive, with the Consumer Sentiment Index up from 72.9 in December. In general, Americans have become more confident in the U.S. economy over the course of the past few months.
With that said, these types of sentiment surveys tend to react to pocketbook issues, and as such, it should not be a surprise that consumer confidence was lower this month. Higher gasoline prices and increased borrowing costs have no-doubt reduced household budgets, somewhat reducing perceptions about the overall economy. Indeed, the indices for the current (down from 98.6 to 91.0) and expected future environment (down from 76.5 to 72.9) both eased slightly this month. Each remains higher than what was observed at the beginning of the year, however.
The key will be how the slight pullback in sentiment impacts consumer spending. So far, the effects have been minimal. Earlier in the week, retail sales figures were higher in July, particularly when you exclude lower motor vehicle sales from the analysis. At the same time, there were also some hints that higher interest rates might have dampened purchases in some categories. In addition, the increase in mortgage rates has lessened activity in single-family housing, as we saw earlier today in the new residential construction report.
Chad Moutray is the chief economist, National Association of Manufacturers.