Consumer sentiment dipped slightly in the first weeks of July as worries about the effect of trade disputes on the economy grew, particularly among wealthy households.
The University of Michigan’s Index of Consumer Sentiment slipped in early July to 97.1, down from 98.1 in July. Despite the decline the reading is still high by historical standards and remains nearly equal to the average in the prior twelve months and since the start of 2017 the Trump presidency.
“The darkening cloud on the horizon, however, is due to rising concerns about the potential negative impact of tariffs on the domestic economy,” the survey’s chief economist, Richard Curtin, said.
The survey showed a deep divide over tariffs along income-lines. Among those in the top third of incomes, 52 percent negatively mentioned the impacts of tariffs. For the broader universe of American consumers, just 38 percent mentioned tariffs, up from 21 percent in June and 15 percent in May.
“Among those who expressed negative views of the tariffs, the Expectations Index was 30.5 points below those who made no mention of tariffs, and in addition, the expected inflation rate was six-tenths of a percentage point higher,” Curtin said.
Although wealthier consumers appear to be deeply concerned over tariffs, the overall expectations index improved in early July, rising to 86.4 from 86.3, according to the survey.
“The continuing strength has been due to favorable job and income prospects, with consumers under age 45 anticipating the largest income gains since July 2000. So far, the strength in jobs and incomes has overcome higher inflation and interest rates,” Curtin said.