The final read on September University of Michigan sentiment shows consumers felt a bit better about things by the end of this month than they did in August, when confidence collapsed to a Trump-era low following the July Fed cut and amid renewed trade tensions.
The headline number for September rose to 93.2 from the preliminary 92 print two weeks back.
Both the current conditions and expectations gauges rose. “Consumer sentiment continued to post small increases throughout September due to more favorable income trends, especially among middle income households”, director of the University of Michigan survey, Richard Curtin, said.
Despite the modest uptick, the situation is far from ideal. “The overall trends in the Sentiment Index remain quite favorable, but show signs of a slow erosion”, Curtin went on to remark.
Generally speaking, confidence remains high, but uncertainty tied to myriad geopolitical concerns is starting to take a psychological toll.
“Some of these concerns are rooted in partisanship, some due to conditions in the global economy (Brexit, Iran, Saudi Arabia, China), and some are tied to domestic economic policies”, Curtin said Friday, adding that “trade policies have had the greatest negative impact on consumers, with a near record one-third of all consumers negatively mentioning trade policies in September when asked to explain in their own words the factors underlying their economic expectations”.
Read that last bit again. Consumers are back to mentioning the trade war, unprompted, with record frequency, when elaborating on their outlook for the US economy. Here is the chart referenced by Curtin:
We’re back to levels last seen in May, when Trump broke the Buenos Aires truce leading directly to the worst month of the year for US equities.
In 2018, tariff jitters didn’t appear to matter all that much for stocks as fiscal stimulus, buybacks and robust corporate profit growth underpinned the market, at least until Jerome Powell’s “long way from neutral” misstep conspired with the imposition of 10% levies on $250 billion in Chinese goods to deep-six things starting in October.
2019 has a been a different story though, with stocks rising sharply as the US and China seemed to be closing in on a deal, and falling in both months when Trump reignited tensions.
The spike in negative mentions of tariffs in June reflected the May trade escalations, while the S&P was boosted in real-time on expectations for monetary easing.
It’s still a tug-of-war between Fed cuts and trade uncertainty, which is ironic considering the US president has deliberately engineered the latter in order to secure more of the former.