Consumer sentiment in the United States fell sharply in August on higher interest rates, slower economic growth and stagnant wages, according to the leading University of Michigan/Thomson Reuters survey from Friday.
The results -- sentiment dropped to 80 in August from 85.1 in July -- was below analyst expectations. Analysts polled by Briefing.com expected the indicator to stay flat, at July’s already impressive 85.1 reading.
The survey of about 500 consumers is a key indicator of consumer spending and overall economic activity, and strongly impacts financial markets.
Survey results showed that Americans felt more hesitant about a gradual U.S. economic recovery, even as the housing sector continues on an impressive rebound.
Briefing.com economists called the drop "surprising," noting that the indicator usually tracks equity prices, employment levels and gas prices.
"With the exception of this week, equity markets have been holding near their historic highs," said the website.
"A sharp decline in initial claims showed improving employment conditions, and gas prices have declined over the last few weeks. All of these factors should have boosted consumer sentiment, not lowered it."
"Rising long-term interest rates probably dampened sentiment," said Capital Economics economist Amna Asaf in a note.
Asaf added that third-quarter growth in actual consumption still looks to be better than added consumption in the second quarter, which stood at 1.8 percent growth.
She said the August drop "reversed only part of the sharp gains of the previous three months."
Nat Rudarakanchana covers commodities and companies for the International Business Times. He is especially interested in precious metals, the food and drink industry, and...