Optimism among American consumers continued to diminish in July with sentiment slipping to its lowest level of the year according to the final reading from Thomson Reuters and the University of Michigan. The group's index on consumer sentiment fell from a reading of 73.2 in June to 72.3, marking the second straight month of declining consumer sentiment and the lowest reading on the index since last December. Of course, the reading actually exceeded the expectations of analysts who took part in a recent Reuters poll, projecting a reading of 72.0, on average.
Economists note that while the reading would not seem to indicate that consumers are expecting a full-blown recession, they also do not expect economic growth sufficient to significantly improve labor market conditions or wages. It would also seem to indicate that Americans have lost faith in current fiscal policy and are becoming convinced that wide-scale change will have to take place before the economy's problems can be solved.
Among the problems facing Americans are rising food prices, which are taking a toll when combined with stagnant wage growth. Of those responding to the Thomson Reuters/UofM survey, 45 percent complained that their finances had gotten worse in recent months, with most of those citing higher prices. In fact, only ten percent of those surveyed said they expect their incomes to increase after adjusting for inflation in the next twelve months.