Consumer sentiment in the U.S. remained stable in July despite persistent trade uncertainties, but an economist warned that the latest tariffs to be imposed on Chinese goods could weaken confidence.
The University of Michigan's index of consumer sentiment registered a final reading of 98.4, matching the initial estimate in mid-July and the consensus estimate of economists polled by Econoday. The index remained higher than its June level.
The "resilience" of consumer confidence in the face of trade tensions was due to a "renewed sense of personal financial optimism," boosted by positive job and income prospects, net household wealth gains and low inflation, according to Richard Curtin, surveys of consumers chief economist at the University of Michigan.
Curtin said a key issue is whether the newly announced 10% tariff on $300 billion of imports from China, which cover more commonly purchased consumer items, will lead to a more cautious outlook among consumers.
"Aside from its direct impact on spending, the much more important issue is how much it lessens overall consumer confidence," Curtin said.
In response to increasing policy uncertainties particularly on trade, consumers have started taking precautionary measures to increase savings and reduce debt, with their attitude toward buying homes and vehicles significantly receding from cyclical peaks, according to Curtin.
The current economic conditions index posted a final reading of 110.7, lower than the initial estimate and the previous month's level. The index of consumer expectations was slightly revised up to 90.5.