Source: Economics Group of Wells Fargo Bank, N.A.
Summary
Consumer sentiment rose in early September amid prospects of lower rates in the year ahead. Yet uncertainty around the presidential election and slowing jobs market are holding back optimism. Not to mention, while inflation isn’t as big of a problem as it once was, higher prices remain a challenge for consumers.
Going to Take More Than Declining Rates to Boost Sentiment
Consumers grew a bit more optimistic in early September. The preliminary read of Consumer Sentiment ticked up to 69.0, which marks the second consecutive monthly gain. Both views on current conditions and expectations about the future improved and propelled sentiment higher earlier this month (chart). Like many market participants, consumers are getting excited for potential Fed easing. A majority of consumers expect interest rates to fall over the next year, with 54% of respondents saying so, which matches a historical high last hit in mid-1980. Yet even with the prospect of lower yields boosting sentiment, it remains at depressed levels. Sentiment is still well off its pre-pandemic level and remains below its post-pandemic high as consumers remain uncertain about the economy (chart).