It’s no happy Friyay today, at least for US consumers: The University of Michigan's latest consumer sentiment index fell for the second straight month from 58.2 in August to a preliminary reading of 55.4 in September.
Today’s reading is not only the lowest since May, but also defied analysts’ expectations that the index would actually rise to 59.3. Those high hopes were likely dashed by last week’s ominous Bureau of Labor Statistics report, which showed unemployment creeping upward to 4.3%, its highest level since 2021. As the job market withers, wallets are also feeling pain amid rising inflation, with the Consumer Price Index up 2.9% year over year in August, a seven-month high.
UofM’s survey also found that Americans don’t expect conditions to improve much, either, with predictions for inflation over the next year holding steady from July to August at 4.8%, and five-year forecasts rising to 3.9%.
“Consumers continue to note multiple vulnerabilities in the economy, with rising risks to business conditions, labor markets, and inflation,” Joanne Hsu, the director of the Surveys of Consumers, wrote in a statement. “Likewise, consumers perceive risks to their pocketbooks as well; current and expected personal finances both eased about 8% this month. Trade policy remains highly salient to consumers, with about 60% of consumers providing unprompted comments about tariffs during interviews.”
Wall Street just doesn’t care
Although US consumers seem ready to curl up under the covers, investors seem more bullish than ever. How can consumer sentiment be so down when the stock market is so up?
Making sense of market moves
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“The stock market is not the economy,” Baird investment strategist Ross Mayfield told Brew Markets. “While the US labor market might be cooling, the AI trade is firing on all cylinders and with the stock market so concentrated in Big Tech stocks, it can often be telling a different story than the economy on the ground.”
Wall Street’s riding high on good odds that the Federal Reserve will cut rates during its meeting next week. This rate cut wouldn’t just be good for business, but could also improve consumers’ moods by making it easier to borrow money for big-ticket purchases like a car or a home. But that’s no guarantee, especially if people are faced with bigger-picture concerns like looming layoffs and egg prices rising to $20 a carton (again).
Still, what’s good for Wall Street can trickle down to Main Street in the form of more jobs, higher wages, and fatter retirement plans. Here’s hoping that whatever happens next week puts everyone in a happier frame of mind.—JD