Real Estate

Consumers unsure about economic conditions

Consumer sentiment decreases in July

Consumer sentiment decreased in July to 90, down 3.7% from 93.5 in June and 3.3% from 93.1 last year, according to the Index of Consumer Sentiment produced by the University of Michigan.

From an article by Jill Mislinski for Advisor Perspectives:

To put today's report into the larger historical context since its beginning in 1978, consumer sentiment is 5.4% above the average reading (arithmetic mean) and 6% above the geometric mean. The current index level is at the 54th percentile of the 463 monthly data points in this series.

The Michigan average since its inception is 85.4. During non-recessionary years the average is 87.6. The average during the five recessions is 69.3. So the latest sentiment number puts us 20.7 points above the average recession mindset and 2.4 points above the non-recession average.

“Although confidence strengthened in late July, for the month as a whole the Sentiment Index was still below last month's level mainly due to increased concerns about economic prospects among upper income households,” said Richard Curtin, Surveys of Consumers chief economist.

“The Brexit vote was spontaneously mentioned by record numbers of households with incomes in the top third, 23%, more than twice as frequently as among households with incomes in the bottom two-thirds, 11%,” Curtin said.

Although consumers may be worried, experts don’t think that worry is necessary.

Near the end of June, Brexit came, then it went and, according to Capital Economics, that’s where the story ends.

No more effect on the housing market, no more lowering the mortgage rates, according to Capital Economics.

“Given the prompt rebound in stock prices as well as the tiny direct impact on U.S. trade, it is surprising that concerns about Brexit remained nearly as high in late July as immediately following the Brexit vote,” Curtin said. “While concerns about Brexit are likely to quickly recede, weaker prospects for the economy are likely to remain.”

“Uncertainties surrounding global economic prospects and the presidential election will keep consumers more cautious in their expectations for future economic growth,” he said.

According to a special report by Redfin in June, 27% of homebuyers said this election will negatively affect the housing market.

“Based on the strength in personal finances and low interest rates, real consumer spending is now expected to rise by 2.6% through mid 2017.

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