Consumer pessimism eased in September especially in the last half of the month according to the consumer sentiment index which finished the month at 59.4 vs 57.8 at mid-month and 55.7 at month-end August. The 1.6 point gain in the month-end to mid-month September comparison implies a 61.0 reading for the last two weeks of the month. Though higher than the shock-infested month of August, this reading, which is barely above 60, is the weakest since the recession period of early 2009.
In contrast to the consumer confidence report that was released Tuesday, today's report shows improvement, not deterioration, in the assessment of current conditions. The assessment of future conditions improved in both this and the consumer confidence report. Both surveys also show an easing in inflation expectations with one-year expectations in this report at 3.3 percent vs 3.7 percent at mid-month and 3.5 percent at month-end August. Five-year inflation expectations are 2.9 percent, down one tenth from mid-month and unchanged from month-end August.
August, as illustrated by this morning's personal income & spending report, proved to be an unusually difficult month for the consumer and subsequent improvement, though welcome, isn't a surprise. The consumer is still facing an uphill battle. The stock market is mildly trimming losses following the report.
Market Consensus before announcement
The Reuter's/University of Michigan's consumer sentiment index rose to 57.8 for the mid-September reading from 55.7 for the final for August. Improvement came from the current conditions component which gained to 74.5 from 68.7 at the end of August. Unfortunately, the consumer expectations component, in a reflection of the weak jobs market and recent trouble in the financial markets, is at the lowest point since the Iranian hostage and oil crisis more than 30 years ago.