WASHINGTON: US consumer confidence fell less than expected in August, with households still upbeat about the labour market despite an escalation in trade tensions, which has cast a shadow over the longest economic expansion in history. While the survey from the Conference Board on Tuesday did not change expectations that the Federal Reserve will cut interest rates again next month, it further reduced the chances of an aggressive easing to counter the effects of the US-China trade war, including tighter financial conditions.
“The consumer remains confident despite the ongoing trade war between the US and China and this bodes well for the economic outlook in the second half of the year,” said Chris Rupkey, chief economist at MUFG in New York. “Consumers may have even seen July’s rate cut as good medicine for the economy which will help keep the economy on the sustainable growth path.” The Conference Board said its consumer confidence index slipped to a reading of 135.1 this month from a slightly upwardly revised 135.8 in July. The index was previously reported at 135.7 in July. Economists polled by Reuters had forecast it dropping to 129.5 in August.
The survey’s present situation measure rose to 177.2, the highest reading since November 2000, from 170.9 in July. The Conference Board, however, cautioned that if the trade conflict persists, “it could potentially dampen consumers’ optimism regarding the short-term economic outlook.” Consumers’ expectations, based on their short-term outlook for income, business and labour market conditions, slipped to a reading of 107.0 this month from 112.4 in July.
The Conference Board survey’s findings are in stark contrast with a University of Michigan survey, which showed consumer sentiment dropping to a seven-month low in early August and a measure of current conditions hitting its lowest level since late 2016. According to the University of Michigan, monetary and trade policies had heightened consumers’ uncertainty about their future financial prospects.
The Conference Board survey places more emphasis on the labour market, while the stock market has a huge influence on the University of Michigan survey. The Conference Board survey’s so-called labour market differential, derived from data on respondents’ views on whether jobs are plentiful or hard to get, jumped to 39.4 in August from 33.1 in July. That measure closely correlates to the unemployment rate in the Labour Department’s employment report. – Reuters
