Washington – In the United States, the rate of customer sentiment just hit its lowest in the year suggesting a just moderate economic growth that could weigh on the Federal Reserve’s decision whether to hike interest rates next week or not.
The customer sentiment is a consumer confidence index – published monthly by the University of Michigan – and a direct representation of American’s confidence in their economy. The sentiment was likely undermined by recent stock market volatility amid worries over China’s slowing economy while a strong dollar is dampening price pressures.
The report said the consumer sentiment index tumbled to 85.7 in September from the final August reading of 91.9. Economists had expected the index to show a much more modest decrease to 91.0. But with the Federal Reserve’s decision on higher interest rates coming later this week and the fall in gasoline prices, customers and investors have been playing it safer than expected. (See Federal Rate Hike Possibly Delayed Until March 2016)
Weaker than expected data on customer sentiment resulted in the dollar dropping against the euro this week.
“The sharp deterioration in consumer confidence and the re-emergence of the disinflationary thrust in goods prices will factor prominently in the Fed’s deliberations next week, and both are likely to add to the case for caution as they consider raising rates,” said Millan Mulraine, deputy chief economist at TD Securities in New York.
Production prices
In a different report, the U.S. Labor Department showed that the production price index remained unchanged in August after a 0.2 percent increase the previous month. Economists had expected the index to edge down by 0.1%.
Economists had forecast a decline in the August PPI as a result of the fall in gasoline prices as the government’s report said food prices rose 0.3% in August, energy prices dropped 3.3%.
But even as households took a dim view of the economy’s outlook, there were only mild declines in sentiment towards the motor vehicle and home purchases.
Europe
Final data from Destatis showed that German customer price inflation remained stable as estimated by experts while customer price index continued to rise 0.2% as in July.
Figures also showed that wholesale prices have been declining since July 2013 marking a 1.1% year decline on August.
The French currently are experiencing an account balance deficit since July due to a decline in surplus on several services according to the Bank of France. The current account deficit is EUR 0.4 billion.
Meanwhile, figures from the Office for National Statistics showed on Friday that UK’s construction output decreased unexpectedly in July after recovering in the previous month.
Source: University of Michigan