Consumer Sentiment Up in August, but Outlook Dims

The survey’s measure of current economic conditions rose from 97.4 to 99.8, the highest level for the subindex since July of 2007. The subindex measuring consumer expectations fell from 71.8 to 71.3, the lowest reading since March. Expectations for one-year inflation fell from 3.3% in July to 3.2%, and five- to 10-year inflation expectations rose from 2.7% to 2.9%.

The survey’s director noted:

Consumer confidence rebounded in late August due to a positive reassessment of prospects for the national economy. A weakened trend in equity and home prices in the absence of resurgent wages would threaten the modest pace of consumer spending that is now expected.

Consumer spending contracted substantially in August, according to Friday’s report from the U.S. Bureau of Economic Analysis. Personal spending dropped by $37 billion from July and personal savings rose by about $30 billion. House price increases are also slowing. The sum of all this could be continued low inflation (almost deflation) and less reason to raise workers’ wages.

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