Consumer sentiment slides to 51.7 while household borrowing speeds up
The University of Michigan's final August reading pulled consumer sentiment down to 51.7, a 6.3 per cent drop from July's 55.2 and 11.2 per cent below August last year. Year-ahead inflation expectations edged down to 4.0 per cent. Federal Reserve figures show consumer loans accelerating to 6.9 per cent in July from 4.3 per cent, while commercial and industrial loans contracted at a 2.4 per cent annual rate.
Economics & Markets··Evening
Sentiment index weakens in August
The University of Michigan index of consumer sentiment came in at 51.7 in the final August reading, down 6.3 per cent from July's 55.2 and 11.2 per cent below August last year. The current conditions index fell to 51.9 and the expectations index to 51.5. Year-ahead inflation expectations ticked down from 4.2 per cent in July to 4.0 per cent, while long-run expectations held at 3.3 per cent for a third consecutive month. Survey director Joanne Hsu said the declines showed up across all political groups and were particularly acute among Republicans, with stronger decreases among older, lower- and middle-income consumers and those holding no stocks. Expected year-ahead business conditions fell 10 per cent and the five-year horizon 13 per cent. Interviews ran from 28 July to 24 August. Hsu noted that although the retreat appeared in every group, it was more pronounced among Republican respondents.[1]
Household borrowing accelerates as business credit contracts
In the Federal Reserve's weekly banking release, commercial and industrial loans at US commercial banks contracted at a 2.4 per cent annual rate in July after growing 6.9 per cent in June and 14.8 per cent in the second quarter. Consumer loans moved the other way, accelerating to 6.9 per cent from 4.3 per cent. Total bank credit grew at a 5.5 per cent annual rate in July against 5.8 per cent in June, and stood at 19,828.1 billion dollars in the week ending 19 August. Loans and leases slowed to 3.8 per cent from 5.6 per cent, while holdings of Treasury and agency securities rose 14.2 per cent. Deposits grew 3.2 per cent after 5.4 per cent in June. The rates are seasonally adjusted annual rates and are adjusted for breaks in the series. The release publishes the latest H.8 figures tracking commercial banks' balance-sheet size and credit components each week.[2]
Expectations and borrowing move in opposite directions
In the Michigan survey the expectations index slipping to 51.5 shows the loss of confidence concentrated on the forward-looking side, while the current conditions index held at 51.9 and preserved the gap between the two components. Hsu reported stronger decreases among older, lower- and middle-income consumers and those holding no stocks, and noted that expected business conditions fell 10 per cent even as year-ahead inflation expectations eased to 4.0 per cent. The consumer-loan acceleration in Federal Reserve data shows banks still extending credit to households, while commercial and industrial loans contracting at 2.4 per cent in the same release marks business borrowing weakening as the consumer side diverges. Total bank credit grew at 5.5 per cent even as loans and leases slowed to 3.8 per cent, and deposit growth remained below June's 5.4 per cent at 3.2 per cent.[1], [2]
