Foodservice Equipment Reports

Mid-July Consumer Sentiment Wavers, And It’s Mostly Brexit’s Fault

The University of Michigan’s preliminary Consumer Sentiment Index for mid-July came in at 89.5, a 4.0 point decrease from June’s final 93.5 reading

The decrease, which marks the Index’s second-lowest level of the year, is concentrated in growing concern among high-income households, may have reflected stock-market fluctuations and widespread uncertainty in the wake of the UK’s June 23 vote to exit the European Union.

Nearly a quarter of households with incomes in the top third mentioned Brexit when asked to identify any recent economic news that they had heard. For these households, the vote’s initial impact on domestic stock prices translated into personal wealth losses.

“While stock prices quickly rebounded, an underlying sense of uncertainty about global prospects as well as the outlook for the domestic economy have not faded,” said Richard Curtin, the survey’s chief economist. Curtin had sent out some warning signals in June about some worrisome underlying trends when the Index fell slightly from May’s 94.7.

Personal finances and buying plans are the least affected components. Real consumer spending can be expected to rise by 2.7% in both 2016 and 2017.

However dim their view of the economy this month, Americans’ impression of the current state of the economy remained solid, at a reading of 108.7. But the future outlook is murkier; the Expectations Index fell 6.4% to 77.1, the lowest level since 2014.

The Index also showed consumers have upped their expectations for how much prices will rise next year. They now anticipate inflation of 2.8% next year, up from the 2.6% that they said they expected when surveyed a month earlier.