U.S. Consumer Sentiment Rose from the Lowest Level Since November 2008
THE TAKEAWAY: U.S. Consumer Confidence Beats Expectations > Sentiment Rebounding > USDollar Index Unchanged
An index of sentiment rebounded from its lowest level since November 2008, considered by many as the peak of the financial crisis. The University of Michigan preliminary reading of consumer sentiment in September climbed to 57.8 from 55.7 in August, beating the 57.0 forecast, according to a Bloomberg News survey. The index remains depressed overall, with the five year average leading up to the recession, from December 2007 to June 2009, coming in at 89.
However, a deeper look inside the report shows that optimism is deteriorating at the core, regardless of what the superficial headline figure shows. A depressed job market, muted income growth, higher inflation and a volatile stock market appear to be weighing on consumption in the United States, a key cog to the overall growth figure. The sentiment index released today showed that the measure of consumer expectations six months from now dropped to the lowest level since May 1980.
Regardless, the headline figure firmed up as market volatility calmed down in the early part of September relative to August. August was marked by an increasingly worsening European sovereign debt situation, as well as the downgrade of United States government debt by Standard & Poor’s. The White House recently unveiled a new jobs plan to help spur labor market growth. The plan, which calls for a payroll-tax break extension and further unemployment assistance, could further boost confidence in the near-term should the bill be passed into law.
Overall, following the news release, the U.S. Dollar was mostly unchanged, moving in 5--pip band against the major currencies. The USD/JPY had the most extreme reaction, moving in a 8-pip range following the release. Volatility is likely to remain muted for the remainder of the day, as Friday marks a quadruple witching day for options. Quadruple witching occurs when contracts for stock index futures, stock index options, stock options and single stock futures all expire.
Written by Christopher Vecchio, Currency Analyst
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