EmailThe final reading of the University of Michigan Consumer Sentiment Index for August was revised up from 54.9 in the preliminary reading to 55.7 and in-line with the Briefing.com consensus estimate.
The current economic conditions index was revised down from 69.3 to 68.7. The expectations index was revised up from 45.7 to 47.4.
Despite the revision, the Consumer Sentiment Index is at its lowest level since November 2008, which followed shortly after the Lehman bankruptcy in September 2008.
The weakness in sentiment is most likely due to partisan politics in Congress and the debt ceiling fiasco.
Normally, consumer sentiment correlates with equity prices, employment, media reports, and oil/gasoline prices. For most of July and the beginning of August, the media focused on the ineptitude of Congress to pass a debt ceiling increase. The consumer got a high dose of reality about the true size of the debt problem, the seeming incompetence of Congress to compromise on a methodology to alleviate the problem, and the prolonged economic weakness that could come from high debt loads.
Sentiment is an extremely poor indicator for consumption growth. Consumption is reliant upon income growth. As long as the employment situation improves, consumption will grow with it regardless of the sentiment reading.
