FXStreet (Guatemala) - James Knightley, analyst at ING Bank NV (ING) noted that the University of Michigan consumer sentiment index for August has surprisingly dropped to 79.2 from 81.8 in July versus expectations of an increase to 82.5.
“The weakness was caused by a sharp drop in the expectations component to 66.2 from 71.8, which leaves this component at its lowest level since October”.
“Given the general improvement in activity data and the fact that gasoline prices have fallen, thereby boosting household spending power, we suspect this was a reaction to the recent equity market correction”.
“Indeed, the current conditions component of the confidence index actually rose to 99.6 from 97.4, leaving this index at its highest since July 2007”.
“As such we can clearly say that households are feeling the better economy. With equity markets having stabilised – the S&P500 is up 2.6% from its lows after falling 4% between late July and early August – we look for a recovery in the final reading of this index”.
“Indeed, with the employment and real income story looking in decent shape we remain positive on consumer demand story”.