US consumer sentiment picks up in July - Uni Michigan

Consumer sentiment in the US picked up a touch in July, according to a preliminary reading from the University of Michigan.

The consumer sentiment index ticked up to 98.4 from 98.2 in June and 97.9 in July last year.

Meanwhile, the current economic conditions index slipped to 111.1 this month from 111.9 in June and 114.4 in the same month last year.

The index of consumer expectations printed at 90.1, up from 89.3 last month and 87.3 in July 2018.

Capital Economics said the modest rise in the index of consumer confidence to 98.4 illustrates that the fundamentals of consumer spending remain solid.

Senior US economist Andrew Hunter said the increase in the expectations index presumably reflects the boost to sentiment from near-record high equity prices and the recent drop-back in gasoline prices. Meanwhile, the dip in the current conditions index means it has been trending gradually lower since mid-2018, although it is still at a strong level by historic standards.

"We estimate that real consumption growth rebounded to more than 4% annualised in the second quarter and, at face value at least, the Michigan index is consistent with growth starting the third quarter at a similarly strong pace. In reality, however, the relationship has been pretty weak in recent years.

"The continued strength of confidence is therefore unlikely to play much of a role in the Fed’s policy deliberations at the end of this month, but arguably more important is the rebound in household inflation expectations. Although the 12 month-ahead measure edged down to 2.6%, from 2.7%, the longer-term measure rebounded to 2.6%, from 2.3%. The latter brings some comfort given that the previous 2.3% reading was an all-time low.

"But the big picture is still that inflation expectations are subdued by past standards. The data will therefore do little to address the concerns of several Fed officials that inflation is set to remain below the 2% target."