Consumer sentiment in the US has peaked

With a sharp rise in interest rates (see chart) and with gasoline prices still elevated after a spike this summer (see chart), it is increasingly important to track the US consumer sentiment. Given the anemic post-recession growth, additional weakness in consumer spending could be bad news for the economy. And while confidence remains near multi-year highs, a number of sentiment measures seem to indicate that American consumer confidence has peaked earlier this summer. Here are three measures that seem to support that thesis:

1. The Thomson Reuters/University of Michigan consumer confidence, the most broadly tracked consumer sentiment index, showed a surprising drop in August.

The Guardian: - Consumer confidence in the US fell unexpectedly in August as higher interest rates and a dip in the rate of economic growth appeared to sap optimism.

The Thomson Reuters/University of Michigan's preliminary reading of consumer sentiment slipped from a six-year high of 85.1 in July to 80.0. The figure was well below the 85.5 reading expected by economists.

Friday's figure follows a series of disappointing results from US retailers including Walmart and Macy's that have caught economists by surprise. "The expectation was that we were going to have a good August," said economist Ken Goldstein of the Conference Board. "Clearly that was wrong."

2. Bloomberg Consumer Comfort Index (which came out today), also showed a decline.

Econoday: - Consumer confidence fell last week to the lowest level in two months as Americans' views on the economy deteriorated. The Bloomberg Consumer Comfort Index fell to minus 28.8 for the period ended August 18 from minus 26.6. The two-week decrease from a more than five-year high reached in early August has been the steepest in a year. The monthly Bloomberg consumer economic expectations gauge held in August at minus 5, a five-month low.

3. Gallup's Economic Confidence Index points to consumer confidence having peaked as early as late May to early June - before the major spike in rates and gasoline prices.

Gallup: - Gallup's Economic Confidence Index was -13 last week, declining to the levels seen during most of July and August, after a slightly better reading two weeks ago. The current index reading is 10 points lower than the peak reached in late May and early June.

While not necessarily a full measure of consumer confidence, there is another indicator worth mentioning. The Knapp-Track Index which tracks the chain dinner house/theme restaurant market is down 3.5% last month -  supporting the theme of consumer sentiment in the US is beginning to turn.

Update:  For completeness it is also worth including the Rasmussen Consumer Index. While the full August number is not yet available, the chart below includes MTD daily average for this month. This index also supports the thesis discussed above.

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