Americans' Confidence Dips In August As Chicago PMI Plunges Into Contraction

The MNI Chicago PMI for August was a disaster, printing below even the worst analyst's expectations.

Against expectations of a rise to 57.9, the headline print crashed from 57.6 to 47.1 (flashing recession signals)...

Prices paid accelerated while the overall business barometer plunged into contraction.

That is the biggest MoM drop since COVID...

However, in the face of that collapse in business confidence, UMich reported US consumer sentiment fell in August for the first time in three months on a worsening economic outlook, even as expectations for inflation in the year ahead eased.

The University of Michigan’s sentiment index decreased to 51.7 in August, according to data released Friday. The final reading was slightly improved from the preliminary reading and above expectations.

Sentiment declines in August were seen for all political groups and were particularly acute among Republicans. 

Year-ahead inflation expectations tumbled  to 4.0%.

The current reading still substantially exceeds the 3.4% seen in February before the Iran conflict began, along with all 2024 readings.

Long-run inflation expectations held steady at 3.3% for the third consecutive month, remaining a bit higher than its 2024 range of 2.8% to 3.2%.

Consumers continue to worry that “inflation will remain elevated for the foreseeable future,” Joanne Hsu, director of the survey, said in a statement.

“In addition to the pocketbook issues that have been central to consumers’ views of the economy, they are increasingly worried that prospects elsewhere in the economy could be weakening,” she added.

With ongoing policy uncertainty including the Iran conflict, consumers anticipate further increases in gasoline prices both in the short and long run.

Interestingly, stockholders remain more fearsome of inflation than non-stockholders...

So, while stocks are testing record highs, businesses are suffering recession-like symptoms, and the 'average joe' appears to be getting less confident (despite inflation fears fading).