Consumer Sentiment Falls

A big downshift in the perception of auto and home prices headlines a soft consumer sentiment report where the preliminary August index fell to 95.3 which is well below consensus and also below the low estimate. This is the softest result since September last year.

August's weakness is centered in the bottom third of the sample's income distribution with buying conditions for large household durables at a 4-year low and pricing perceptions at a 10-year high. Buying conditions for vehicles are also at a 4-year low with pricing perceptions the most unfavorable since 1984.

Yet despite these price concerns, inflation expectations are steady: unchanged at 2.9 percent for the year-ahead outlook and up only 1 tenth for the 5-year outlook to 2.5 percent.

Other readings include no change for the expectations index, at 87.3, and a nearly 7 point decline in current conditions to 107.8. Note that weakness in August current conditions offers a hint for weakness in August consumer spending.