US consumer confidence falls as business lending contracts
The University of Michigan's August survey put consumer sentiment at 51.7 and its expectations index at 51.5. Chicago's business barometer fell from 57.6 to 47.1, moving back into contraction. Federal Reserve data also showed commercial and industrial lending at US banks contracting at a 2.4 per cent annual rate in July while consumer lending accelerated to 6.9 per cent. Together, the same data-day readings show household expectations and business finance moving in different directions.
Economics & Markets··Morning
Consumer expectations weaken
The University of Michigan's final August survey put consumer sentiment at 51.7, down from 55.2 in July and 11.2 per cent below August last year. Its current-conditions index was 51.9 and the expectations index 51.5. One-year inflation expectations eased from 4.2 per cent to 4.0 per cent, while long-run expectations held at 3.3 per cent for a third month. The survey said expectations for business conditions a year ahead fell 10 per cent and its five-year horizon fell 13 per cent.[1]
Chicago activity returns to contraction
MNI Indicators' Chicago business barometer fell from 57.6 to 47.1 in August. A reading below 50 signals contraction in Chicago-area business activity; August was the first contraction since April and the lowest reading since December. Economists had expected the index to rise to 59.0. The drop therefore ran not only below the previous month but also in the opposite direction from the market expectation recorded with the release.[2]
Business and consumer credit diverge
The Federal Reserve's weekly banking release said commercial and industrial loans at US commercial banks contracted at a 2.4 per cent annual rate in July. They had grown 6.9 per cent in June and 14.8 per cent in the second quarter. Consumer loans instead accelerated to 6.9 per cent after 4.3 per cent in June. Total bank credit grew at a 5.5 per cent annual rate in July, while the same release said growth in loans and leases slowed to 3.8 per cent. The Michigan survey reported weaker expectations for business conditions a year ahead, while the Federal Reserve release showed faster consumer-credit growth; the two sources put expectations and observed household borrowing on different paths.[1], [3]
