All eyes will be on this morning’s University of Michigan Consumer Sentiment reading scheduled to be released at 10:00 a.m. ET. The preliminary read on August sentiment, released Aug. 14, matched the March low of 63.2. The final read is expected to show a slight uptick to 64.0.
Earlier this week, the Conference Board released its consumer confidence index, which showed a read of 54.1 in August from 47.4 in July – well ahead of Wall Street consensus.
As the Associated Press noted:
Given the solid increase in the Conference Board’s consumer confidence index for August, one can expect the Reuters/University of Michigan’s survey to show that the final reading of its consumer sentiment index rose slightly to 64 from the mid-month reading of 63.2.
A revised reading of 64.0 will still be below the May-July average, but the number is critical to spending patterns of American consumers. When confidence is high, people will be more likely to spend and increase their discretionary budgets. And, with a stock market returning 8+% in July and a dip in the unemployment rate, many traders may be forecasting their own upside surprise with the revision.
As SmartMoney puts it:
The first reading of the [University of] Michigan survey showed an unexpected drop in sentiment with the index falling to 63.2 from 66 in July. But the revision could show some upside surprise. The Conference Board reported earlier in the week that its Consumer Confidence Index rose to 54.1 from 47.4 in July, trouncing the average forecast of 47.5, according to Thomson Reuters. The stock market has also been rising and home price declines seem to be leveling off, helping consumers feel wealthier (or at least not as poor as six months ago).
Not all economists are forecasting a positive revision. Scott Hoyt, senior director of consumer economics for Moody’s Economy.com has this to say to SmartMoney: “We’re still bleeding jobs and wage income is falling.” Those comments will certainly add doubt the revision will print higher.
Retailers are poised to rally if the final read exceeds consensus expectations. Consumers will most likely return to their shopping ways knowing housing, sentiment and the jobs picture are all improving.
As Ian Pollick, strategist at TD Securities recently said to Mortgage News Daily, “The U.S. consumer continues to be hit-hard, though conditions are definitely moving in the right direction.”
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