Traditional U.S. assets are going haywire as US-China trade tensions continue to rattle global markets

The most recent University of Michigan survey, published on Friday, found that consumer sentiment fell to 50.8 from 570, nearing the most depressed level in three years and far below that seen during the 2020 Covid shutdowns.

U.S. economic pessimism hit a three-year high in August, according to the University of Michigan's final reading of its consumer sentiment index, which fell to 50.8 from July's 57.0. The index is now at its lowest level since August 2020, and economists had expected a reading of 55.1.

The broadest measure of consumer spending, which is adjusted for inflation and seasonal variations, decreased by 0.3% in July, compared to economists' predictions of a 0.1% rise and June's flat reading, according to a report by the U.S. Bureau of Economic Analysis.

The University of Michigan survey also showed that year-ahead inflation expectations rose to 6.7%, the highest since 1981. Economists had anticipated a reading of 5%.

"Consumers grew more pessimistic about the economic outlook in August, with the overall index falling to its lowest level since August 2020," said Paul A. Schons, Ph.D., director of the University of Michigan Surveys of Consumers. "The decline was driven by a worsening assessment of both the current economic conditions and the outlook for the year ahead."

"Inflation expectations also rose sharply, with consumers now expecting inflation to reach 3.3% over the next 12 months, the highest reading since July 2023. This is a significant increase from last month's expectation of 2.8% and reflects the ongoing pressure on prices."

The survey's one-year inflation expectations slid to 3.3% from 2.8%, while permanent inflation expectations remained at 2.9%.

The University of Michigan's consumer sentiment index is a monthly survey of 600 consumers conducted by the University of Michigan's Survey Research Center. The survey is used to track consumer confidence and pessimism about the U.S. economy.

The survey's findings are released in two stages: a preliminary report, which is based on a sample of 500 consumers, and a final report, which is based on a full sample of 600 consumers. The final report is typically released on the Friday following the preliminary report.

The consumer sentiment index is a valuable indicator of economic activity, as consumer spending accounts for the majority of U.S. GDP. When consumers are confident about the economy, they are more likely to spend money, which can boost economic growth. Conversely, when consumers are pessimistic about the economy, they are more likely to save money, which can dampen economic activity.

The survey's findings can also influence Federal Reserve policy. If the survey shows that consumers are expecting high inflation, the Fed may be more likely to raise interest rates to keep inflation in check.

Overall, the University of Michigan's consumer sentiment index is a closely watched indicator of the health of the U.S. economy. The index's recent decline is a sign that consumers are becoming more pessimistic about the economy, which could have implications for consumer spending and economic growth in the months ahead.

The post U.S. economic pessimism hits 3-year high; consumer sentiment plummets to 50.8 appeared first on Forex News | Forex Signals | Forex Articles | FXStreet.

.