Investing.com – U.S. consumer sentiment was on the decline, hitting a six-month low, as tariff worries more than doubled, dampening optimism over the economy, according to a report published Friday.
The preliminary publication of the data for July from the University of Michigan's Consumer Survey Center showed that consumer sentiment fell to 97.1, its lowest level since January, from 98.2 a month earlier.
Analysts had forecast a drop to just 98.1.
The current conditions indicator increased to 113.9 in July, from the previous 111.8.
Economists had projected that the index would rise to just 113.0.
Additionally, consumer expectations unexpectedly decreased to 86.4 in July, from the previous 89.1.
That missed consensus that had expected a rise to 89.7.
Meanwhile, inflation expectations for the next 12 months decreased to 2.9% from 3.0%, while the five-year gauge fell to 2.4% from the previous 2.5%.
The survey’s chief economist Richard Curtin indicated that although sentiment dropped in early July, it still “remained nearly equal to the average in the prior twelve months (97.7) and since the start of 2017 (97.4)”.
“The continuing strength has been due to favorable job and income prospects, with consumers under age 45 anticipating the largest income gains since July 2000,” Curtin explained.
Curtin pointed out that strength in jobs and incomes has overcome higher inflation and interest rates.
Consumers' tariff concerns on the rise
“The darkening cloud on the horizon, however, is due to rising concerns about the potential negative impact of tariffs on the domestic economy,” Curtin warned.
He noted that negative concerns about the potential impact had risen from 15% in May to currently 38% in July, while 52% of those surveyed in the top third of income distribution - equivalent to half of consumer spending - negatively mentioned the economic impact.
“Among those who expressed negative views of the tariffs, the Expectations Index was 30.5 points below those who made no mention of tariffs, and in addition, the expected inflation rate was six-tenths of a percentage point higher,” Curtain said.
“While consumers may not understand the intricacies of trade theory, they have substantial experience making decisions about the timing of discretionary purchases based on prospective trends in prices,” he concluded.