Consumer confidence fell in August: high inflation rates and expensive loans are the worst combo
Consumer confidence in the US economy fell markedly in August, while inflation expectations rose slightly. The latest comprehensive data released by the University of Michigan on Friday underscored these trends.
The Consumer Confidence Index, a barometer of consumer business confidence, fell to 69.5 in August from 71.6 in July. It is worth noting that the preliminary reading for August showed a slightly higher index of 71.2. This decline may reflect a change in perceptions of current and near-term economic conditions.
Similarly, the perception of the current state of the economy also declined slightly among respondents. The specific sub-index indicating respondents’ views on the current state of the economy fell from 76.6 in July to 75.7 in August. Moreover, the expectations index for the economic outlook, which is an important indicator for economic forecasts, dropped from 68.3 to 65.5.
Regarding inflation, respondents’ forecasts for the next 12 months increased slightly. The inflation forecast for the next 12 months increased to 3.5% from the initial figure of 3.3%. This indicates an increased perception of inflationary pressures over the next 12 months. In contrast, the inflation rate forecast for July was 3.4%.
Interestingly, on a longer-term view, the inflation outlook for the next five years has previously remained within a consistent range: 2.9% to 3.1%, which is in line with the historical range of inflation fluctuations.
Overall, these changes in consumer sentiment and inflation expectations are important for understanding the broader economic environment and how consumers perceive economic conditions and inflationary pressures.