U.S. Consumer Sentiment Hits Second-Lowest Level on Record; “89% Chance of Rate Hike”

[Financial News]  

U.S. consumer sentiment was found to have reached its second-lowest level on record this month. High oil prices and inflation stemming from the Iran war fueled consumers’ anxiety.
The University of Michigan’s current conditions index, compiled through a survey of consumers, came in at 47.8 this month—the second-lowest reading since the index was launched in 1952. It fell 7.5% from August and 13.2% from a year earlier.
Joanne W. Hsu, who oversees the University of Michigan’s consumer survey, explained, “The one-year outlook indexes for both personal finances and business conditions plunged. With fuel prices rising again and trade tensions resurfacing, consumers are facing greater pressure on their finances in the year ahead.”
Consumers’ one-year inflation expectations rose to 4.6%, up 0.6 percentage points from the previous month. That matched the annual high recorded in June.
The expectations index also plunged 11.1% in a month.
According to data released by the U.S. Department of Labor that day, gasoline prices surged 3.9% last month from the previous month and 27.4% from a year earlier. Heating oil prices jumped 10.1% and 52%, respectively, over the same periods.
The August consumer price index (CPI) also rose 0.4% from the previous month and 3.4% from a year earlier, in line with market expectations.
However, core CPI, which excludes the more volatile energy and food components, rose 0.3% month over month, slightly exceeding expectations. Its year-over-year increase was 2.4%, indicating that “sticky” inflation continues.
As it became clear that inflation was not falling easily amid rising oil prices, markets began treating next week’s rate hike as a certainty.
According to CME Group’s CME FedWatch Tool, futures investors see an 88.7% chance that the Federal Reserve System (Fed) will raise its benchmark interest rate by 0.25 percentage points at the conclusion of its Federal Open Market Committee (FOMC) meeting on the 16th. The probability was 48.4% a month earlier.
However, the three major New York stock indexes all rose by more than 1% that day, as if they had already priced in the expected move.


[email protected] Song Kyung-jae Reporter