Consumer Sentiment Plunges
The University of Michigan reports that consumer sentiment fell to 86.5 in early July from 92.4 in June. The consensus had expected a flat number.
The level of sentiment is the lowest since last November, and comes in sharp contrast to the strong retail sales report. The decline was concentrated in expectations, which plunged to 78.5 from 87.9. The current conditions report dropped only marginally, to 99.0 from 99.5.
The slump suggests that consumers could back away from spending in the summer, and may require revising downward our consumer spending forecast.
June Retail Sales Jump 1.1%
Retail sales jumped 1.1% in June, more than the 0.7% expected by the consensus of economists. Excluding auto dealers, however, sales were up 0.4%, in line with expectations.
The jump just offsets the 1.1% May drop, bringing sales back to their April level. The data confirms that the May drop was mostly bad weather, not bad vibes. Consumers still seem ready to spend beyond their means, and we expect the economy to reaccelerate. Still, the Fed is not expected to move interest rates this year.