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Trump economy: Consumer sentiment drops on trade, policy uncertainty



Americans became less optimistic about the economy this month as uncertainty surrounding trade and other policies weighed on their outlook.

The consumer-sentiment index declined far more than expected in early August to 92.1 from 98.4 in the previous month, the University of Michigan said, marking its lowest level since January and the second-weakest reading of the Trump presidency. Economists surveyed by The Wall Street Journal forecasted a reading of 97.

“Monetary and trade policies have heightened consumer uncertainty — but not pessimism — about their future financial prospects,” said Richard Curtin, the chief economist of the survey. “Consumers strongly reacted to the proposed September increase in tariffs on Chinese imports.”

Trade concerns were cited by 33% of all consumers, which was just below a recent peak of 37%, in the weeks after President Donald Trump said that he would slap tariffs on all remaining imports from China. But shortly after the August 1 announcement, he decided to delay some of those for the holiday shopping season.

“Although the announced delay until Christmas postpones its negative impact on consumer prices, it still raises concerns about future price increases,” Curtin said.

The Federal Reserve lowered its benchmark interest rate late last month by a quarter percentage point, a widely expected move officials said was prompted by concerns about slower growth and trade uncertainty.

Curtin said the cut could have underscored consumers’ concerns about a potential downturn. A key recession signal flashed this week for the first time since before the start of the global financial crisis in 2007.

“The main takeaway for consumers from the first cut in interest rates in a decade was to increase apprehensions about a possible recession,” he said. “Consumers concluded, following the Fed’s lead, that they may need to reduce spending in anticipation of a potential recession. Falling interest rates have long been associated with the start of recessions.”

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