The July preliminary reading of the University of Michigan Consumer Sentiment Index fell from 73.2 in June to 72.0. The Briefing.com consensus expected sentiment to improve modestly to 73.5. While falling oil and gasoline prices have generally helped consumer sentiment over the past few weeks, they continued to be outweighed by the negativity stemming from the soft labor market and downbeat news reports surrounding the eurozone debt crisis, fiscal cliff, and the presidential election.
Those weaknesses dented consumer expectations, as the respective index fell from 67.8 in June to 64.8 in July. That is the lowest reading since reaching 63.6 in December 2011. Surprisingly, feelings about present economic conditions improved in July as the respective index increased slightly from 81.6 in June to 83.2. That is still well below the relative peak from May when it reached 87.1. Consumption growth relies on income gains and not sentiment. As long as wages improve, like they did in June, consumption growth should follow.