E American Consumers Are Optimistic, But Are Also Experiencing Some Sticker Shock

The University of Michigan’s Consumer Sentiment Survey for August showed a decline in the index to 96.2 from 97.9 in July. The index has slumped since March when it reached its highest level since 2004 with a reading of 101.4.

Nonetheless, a glance at the following chart indicates that the overall consumer optimism is still somewhat elevated, even though specific survey details indicate that buying conditions are less favorable.

The survey indicates that in August there were less favorable consumer perceptions concerning prices as well as some new worries related to rising interest rates. Consumers are still not too concerned about higher inflation curbing their spending plans. Consumers still view solid future income and job prospects as the main reason for their buying optimism.

However, a less favorable view of buying conditions due to high prices was largely responsible for the pullback in August. As a recent Briefing.com publication points out, vehicle buying conditions were viewed less favorably than at any time during the last four years. Home purchase decisions were also viewed less favorably than any time in the past ten years.

This kind of weakening in consumer optimism is usually an indicator that the economic expansion is in a later stage, and quite mature.