The Reuters/University of Michigan consumer sentiment index dropped from 85.1 in July to 80.0 in the first of two readings for August, the sharpest decline since last December when a number of budget related issues were weighing on the American mood.
This marks the weakest confidence level since April and is consistent with other measures that show the consumer outlook worsening recently. Earlier in the week, a Gallup survey indicated a slight uptick in confidence after a steady decline since June and data late last month from the Conference Board showed a small decline from a four year high.
The decline in sentiment was primarily in the current conditions index that fell from 98.6 in July to 91.0 in August while the expectations component dropped from 76.5 to 72.9.
The separate 12-month economic outlook fell more than either short-term surveys, plunging 12 points to 92, and, with rising real estate and stock prices as gasoline prices have recently fallen, finding an obvious cause for the decline is not straightforward.
It’s not clear how much Americans, in general, know about the possibility of the Federal Reserve tapering its money printing effort next month or about the major economic reports, most of which have produced positive, but it’s possible that the looming budget/debt ceiling showdown in Washington is already having a negative impact.
