Consumer Sentiment Weakens in Preliminary September Report

The ""Thomson Reuters/University of Michigan Index of Consumer Sentiment"":http://www.sca.isr.umich.edu/ fell to a five-month low of 76.8 in September's preliminary report, spelling a potentially weak third quarter in terms of consumption growth.

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Out of a group of economists surveyed by _Bloomberg_, the median projection for September's preliminary reading was 82. Estimates ranged from 77 to 85.

The decline in overall sentiment was largely due to a drop in the Expectations Index, which measures consumer confidence for the next six months. That index fell to an eight-month low of 67.2.

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The expectation for inflation over the next year rose to a six-month high of 3.2 percent, ""giving the Fed more reason to begin the tapering of QE3 [quantitative easing] at the FOMC [Federal Open Market Committee] meeting next week,"" said Amna Asaf, economist at ""Capital Economics"":https://www.capitaleconomics.com/. The Federal Reserve's loose monetary policy over the past year has been based largely on the currently low inflation and high unemployment rate.

Meanwhile, the Current Conditions Index, which serves more as a measure of personal finances and the job market, fell to 91.8, another five-month low.

""On the whole, based on the historical relationship, the expectations index now suggests that third-quarter consumption growth might slow down a bit, from the second quarter,"" Asaf said. ""However, near-term outlook has improved. The recent rally in stock markets along with the improving trend in actual retail sales data suggest that prospects for a pickup in fourth-quarter consumption growth are improving.""

While the mid-September report may point to a weaker month for sentiment, the final numbers--to be released September 27--may play out differently. For example, while August's index value of 82.1 represented a decline from July, it was still stronger than the mid-month report indicated.