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Consumer Sentiment Strong in July

Despite experiencing a small downtick in preliminary reports, consumer sentiment reached its highest level in six years in July, according to a report from the ""University of Michigan's"":http://www.umich.edu/ Survey Research Center.


The survey's Sentiment Index was 85.1 in July, up from 84.1 in June and 72.3 in July 2012. The ""mid-month July report"":https://themreport.com/articles/consumer-sentiment-ticks-down-slightly-in-early-report-2013-07-12 measured the index at 83.9.

""The July survey suggests a growing resilience among consumers that will enable them to more easily withstand the cross-current inevitable in a slow growth economy,"" said Richard Curtin, director of the monthly survey.

The Current Conditions Index, a measure of consumer sentiment regarding respondents' current economic situation, improved strongly to 98.6, up from 93.8 in June and July 2012's 82.7.


A major catalyst behind the significant gain in the Current Conditions Index was an apparent improvement in personal finances. Younger households reported greater income gains--due primarily to gains in employment and work hours--while middle- and upper-income households were more likely to report asset gains and lower debts.

For the year ahead, many consumers said they expect inflation-adjusted income gains during the year ahead (the highest proportion since late 2007), while a similarly large share anticipate real income gains over the next five years.

Meanwhile, 68 percent of consumers responding in July said they expect interest rates to increase in the year ahead, up from 55 percent of respondents in June and 33 percent in July 2012. With interest rates expected to rise, longer-term prospects for the economy took a hit, with the Expectations Index falling to 76.5 from June's 77.8--though it was still far above last July's 65.6.

Nevertheless, buying plans for the short term look favorable. Among households with incomes of $75,000 or more, more than 25 percent cited the advantage of buying homes before prices or rates increase further--indicating they may willing to open up their wallets in the near future.

""These differences reflected the expectation that interest rates would rise in the future,"" Curtin noted. ""Nonetheless, this was a robust sign that consumers expect the expansion to continue and act to speed up their buying plans.""


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