Consumer Sentiment Defies Forecast, Rises on Jobs Increases

Economists had expected the University of Michigan/Thomson Reuters consumer sentiment index for August to be roughly equal to the 72.3 reading posted in July. But today’s report indicated a reading of 73.6, the highest level since May.

July’s increase of 163,000 nonfarm jobs was the biggest increase since March and could be a contributing factor to the rise in consumer sentiment. July also saw a rise in retail sales, another sign that perhaps consumers are feeling somewhat better about their prospects. And home prices have either stabilized or begun rising again, which only adds to a brighter outlook for many consumers.

On the current conditions portion of the index, consumer sentiment rose from 82.7 in July to 87.6 in August. The expectations portion of the index did not fare so well, with a drop from 65.6 to 64.5.

Gasoline pump prices could start weighing on consumer sentiment as prices rise, and a weak back-to-school shopping season might also tamp down consumer enthusiasm. But for today at least, things are looking up.

Paul Ausick