US consumer sentiment drops as high-earners worry about Brexit impact

Consumer sentiment in the US deteriorated in July as high-earners worried about the impact of Brexit.

The University of Michigan's preliminary consumer sentiment index fell to 89.5 in July, missing expectations that the reading would be unchanged from June’s 93.5.

Meanwhile, the index of current economic conditions came in at 108.7, down from 110.8 the month before and 107.2 in July 2015.

The index of consumer expectations slid to 77.1 in July from 82.4 in June and 84.1 in July last year.

Surveys of Consumers chief economist Richard Curtin said: “The early July decline in consumer sentiment was due to increased concerns about prospects for the national economy that were mainly voiced by high income households.

“Prior to the Brexit vote, virtually no consumer thought the issue would have the slightest impact on the US economy. Following the Brexit vote, it was mentioned by record numbers of consumers, especially high income consumers.”

He added that 24% of households with incomes in the top third mentioned Brexit when asked to identify any recent economic news they had heard.

Pantheon Macroeconomics said: “We are very much inclined to see this as a temporary knee-jerk reaction to the drop in stock prices triggered by the Brexit referendum.

“With the S&P having quickly recovered its post-referendum losses and hit new highs, we expect a clear rebound in sentiment next month. The July drop is very probably nothing to worry about.”