Consumer Sentiment Index Below Expectations

An early reading on the effect of global volatility is downbeat as the consumer sentiment index came in well below expectations, at 91.9 for the final August reading. The mid-month reading was 92.9 which roughly implies a pace near 91.0 over the last two weeks which is the softest since May.

But the effect isn't enormous as the current conditions component, where the immediate impact of market events is most felt, slipped only 2 points over the last two weeks to 105.1. This is a respectable level but is slightly lower than the 107.2 for July and points to a slight slowing in consumer activity for August.

The expectations component is only marginally lower, at 83.4 for final August for a 4 tenths dip from mid-month and a 7 tenths dip from July. Expectations for inflation are flat, at 2.8 percent for the 1-year outlook, which is unchanged from both mid-month and July, and at 2.7 percent for the 5-year which is unchanged from mid-month and down 1 tenth from July.

This report is probably a wash for the September FOMC. The doves can argue that market events in China are hurting consumer confidence but the hawks can argue that the effect isn't that great.

Recent History Of This Indicator:
The final reading for this month's consumer sentiment index will include the psychological impact of China's devaluation and subsequent volatility in the financial markets. This index has been coming off highs early in the year but, boosted by strength in the jobs market, is still solid. Despite the global volatility, forecasters see a slight uptick for the final August reading, to 93.3 in what would be a 4 tenths gain from the flash reading.