It’s a miss! Another one. And it comes with a warning for the White House and the Kevin Warsh Fed on household inflation concerns.
“It” is the preliminary read on University of Michigan sentiment for August, released on Friday. The headline was predictably weak, at 51, down nearly 8% from July and more than 12% versus the final reading for this month last year.
I say “predictably.” Economists didn’t predict it. Not collectively, anyway. They expected 54.6 from the marquee measure of household sentiment. Silly them.
Suffice to say the rebound from the record low hit in and around the onset of the war with Iran may not prove sustainable.
The expectations index fell the most, dropping 9% from July to 14. I’m just joking. I mean, it did fall 8.7%, but the actual print on the forward-looking gauge was 50.6.
Trump’s the proud owner of three 50-handle Michigan expectations prints, a pair of 47-handle readouts, one 49-handle print and, of course, May’s 44-handle reading, only the second of its kind since 1980.
As the figure above shows, America’s “Golden Age” is defined by what it’s fair to call the worst consumer sentiment ever recorded outside of recessions and their aftermath. It’d be funny if weren’t… you know what? It’s funny. Full stop.
But a lot of Americans aren’t laughing. Because the cost of living, which Trump promised to lower, isn’t coming down. And that’s showing up in real income expectations.
As the figure below shows, a mere 8% of consumers expect their pay growth to outstrip inflation over the next 12 months.
That’s a 10ppt drop from December of 2024, just after Trump’s reelection.
If you’re wondering whether these results are hopelessly skewed by partisanship, the answer’s “yes, obviously,” just like everything else in America since what, to anyone younger than 80, may as well be time immemorial.
But, as survey director Joanne Hsu was keen to note Friday, “Republicans exhibit[ed] the strongest month-to-month decline in sentiment” this month. Indeed, the mood among GOP households “is now 19% below readings just prior to the Iran conflict and the lowest since the 2024 election,” she added.
Sentiment is absolutely suffering. I recently took 2 family members to dinner at Ruth’s Chris Steakhouse. Only one glass of wine was ordered and no dessert. The dinner bill, including tip, was $475. I knew it was going to be expensive- but that was insane.
Setting aside the inflation issue, I’ve never had a meal at Ruth’s Chris that I thought was worth it.
What outfit are you with? Everyone knows consumer sentiment is a hoax – just like the Dumocrat’s made up “affordability” – which no one ever talked about before. People know a Golden Age even when they can’t see it or feel it.