UM: U.S. consumer sentiment falls most since 2012 on tariff concern

Reade Pickert

U.S. consumer sentiment fell the most in six years, slumping to the lowest level of Donald Trump's presidency as Americans expressed concern about how his tariffs will affect the economy.

The University of Michigan's final sentiment index fell to 89.8 in August from a previously reported 92.1 and 98.4 in July, data showed Friday. The gauge of current conditions dropped to the lowest since October 2016, while the expectations index matched January as the weakest since that same period.

In this Aug. 7, 2019, file photo shoppers ride an escalator inside the Glendale Galleria in Glendale, Calif. The University of Michigan's final sentiment index fell to 89.8 in August from a previously reported 92.1 and 98.4 in July showing the lowest level of consumer sentiment since 2012.

Key insights

  • The increasingly downbeat mood suggests growing concern about trade policy uncertainty and a potential economic downturn are weighing on attitudes. Sentiment may face further headwinds as the trade war with China escalates, with additional tariffs set to go into effect Sept. 1.
  • The 8.6-point drop from July was the largest since December 2012, while the 89.8 reading for the sentiment index was the lowest since October 2016.
  • Buying attitudes toward appliances, home electronics and other household durables fell to a five-year low on tariff concerns. Attitudes toward buying vehicles declined to the lowest level since 2013, with references to high prices reaching the highest since 1997, according to the report.
  • The data follow somewhat mixed consumer sentiment readings. The Conference Board's confidence measure eased in August but posted the best assessment of current conditions since 2000. Bloomberg's weekly comfort gauge rose for a second week, but the monthly expectations gauge fell to a five- month low as more Americans said the economy is getting worse.

Official's view

“ The recent decline is due to negative references to tariffs, which were spontaneously mentioned by one in three consumers,” Richard Curtin, director of the University of Michigan consumer survey, said in a statement. “ Trump’s tariff policies have been subject to repeated reversals amid threats of higher future tariffs. Such tactics may have some merit in negotiations with China, but they act to increase uncertainty and diminish consumer spending at home.”

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  • The economic outlook for the next 12 months fell to the lowest since January, while the five-year outlook also tumbled.
  • Views of expectations for personal finances plunged more than previously reported from a July level that was the highest since 2003. Attitudes on the current situation also fell.
  • Consumer expectations for inflation edged up, with price gains over the coming year rising to 2.7% from 2.6% in July. Five-year estimates were up to 2.6% after 2.5% the prior month.
  • A measure of home buying attitudes remained near recent lows.
  • Economists had expected an upward revision to the sentiment measure to 92.4.
  • Interviews were conducted July 31 to Aug. 26. 2019 Bloomberg L.P.