Consumers aren’t panicking, despite some concerns about the economy.
Topline: A new monthly survey from the University of Michigan shows that despite ongoing concerns over tariffs and slowing economic growth, consumer sentiment posted a small rebound in September—suggesting the continuation of solid consumer spending that should help keep the economy going.
Key background: Economic uncertainty has been weighing on consumers in recent months: Between July and August, the consumer sentiment index fell from 98.4 to 89.8, marking the largest monthly decline since 2012. The 8.6% drop was a result of a turbulent month for investors, following an escalation of the U.S.-China trade war and a yield-curve inversion signaling an economic downturn.
- On Friday, the University of Michigan’s final measurement of consumer sentiment came in at 93.2 for September, slightly above a preliminary estimate of 92.0 taken earlier in the month.
- The gain in consumer confidence was thanks to “ [more] favorable income trends, especially among middle income households,” the survey’s chief economist, Richard Curtin, wrote.
- While showing a small rebound from August, September’s number is still down almost 7% from a year ago.
- Many consumers have become increasingly concerned about the impact of the trade war on the domestic economy: 38% of those surveyed earlier this month referenced the negative impact of tariffs, the highest percentage since March 2018.
- Some consumers also had negative outlooks on the global economy (Brexit, Iran, Saudia Arabia, China), while others, concerned about domestic economic policies, anticipate higher inflation and more unemployment in the year ahead.
- Still, the data suggests consumer spending will hold steady for now and can continue to help prop up the slowing domestic economy.
Crucial quote: “While a recession is not anticipated in the year ahead, neither is a resurgence in personal consumption,” Curtin said in a note earlier this month. “The outlook for consumption is for a slower but positive growth, keeping the expansion going for another year.”