US consumer sentiment decreases in August

Washington - Confidence among U.S. consumers eased for a second month in August as households braced for an increase in interest rates that could slow growth.

The University of Michigan’s preliminary index of sentiment decreased to 92.9 from 93.1 in July, figures showed Friday. The median forecast in a Bloomberg survey of economists called an increase to 93.5. Concern about the economy was counterbalanced by the most optimistic views on wages in 15 years.

Americans’ spirits have been boosted as gasoline prices retreat and companies continue to increase headcounts and limit dismissals. The global financial turmoil caused by China’s recent currency devaluation have yet to effect sentiment, heightening the focus on future reports.

“Given the increase in uncertainty, its potential impact on consumer sentiment must be carefully monitored,” Richard Curtin, director of the Michigan Survey of Consumers, said in a statement. “The declines in prospects for the economy probably reflect the expected increases in interest rates.”

The Federal Reserve will probably raise the benchmark interest rate next month, according to a majority of economists surveyed by Bloomberg this month.

The survey’s gauge of consumer expectations six months from now fell to 83.8 from 84.1 in July. The gauge of current conditions was little changed at 107.1 in August from 107.2 the prior month.

Americans expected an inflation rate of 2.8% in the next 12 months, the same as in July, the report showed. Over the next five to 10 years, they anticipated a 2.7 percent rate of inflation, down from 2.8%.

Other measures

The Michigan report on Friday is in line with the Bloomberg Consumer Comfort Index, which is hovering near a two-month low.

Even as Americans’ views of the economy have wavered amid global risks, spending has held up on the heels of rising employment, stronger finances and still-cheap fuel. Sales at retailers advanced 0.6 percent in July and the prior two months were revised higher, according to the Commerce Department.

Consumers can take comfort in an improving job market. Applications for unemployment benefits last week remained near a four-decade low, while the unemployment rate in July stayed at a seven-year low of 5.3%, according to Labour Department figures.

While the job market continues to improve and wage growth remains meager, attitudes are improving, particularly for Americans in the bottom third of the income scale, who projected pay would rise 2.7% over the next year.

Some 47% of those polled said that their current financial situation had improved, one point short of the highest level reached since the last recession began, the report showed. Four out of every 10 respondents said rising incomes were the biggest factor in strengthening their finances, the most since 2000.

Average hourly earnings increased 2.1% in July from a year earlier, remaining within the narrow range it’s tracked since the end of the recession six years ago.