US July consumer confidence drops to 3-month low on Brexit aftermath

Consumer confidence in the United States during the month of July dropped to three-month low, following the Brexit outcome that shook high-income earners in the US, bring sentiments lower. However, a gauge of expectations had shown that consumers are more pessimistic than the actual forecast.

The preliminary consumer sentiment index fell to 89.5, a three-month low, from 93.5 in June, data released by the University of Michigan's Consumer Survey Center showed Friday. The median projection in a Bloomberg survey called for a flat index in July. Also, other market participants had expected no change, as well.

The current conditions indicator fell more than expected to 108.7 in July, compared to expectations of 109.3 and the previous month's reading of 110.8. That was its lowest level since August 2014. Meanwhile, consumer expectations moved lower to 77.1 in July, compared to the estimate of 81.5 and the previous month's reading of 82.4.

"Prior to the Brexit vote, virtually no consumer thought the issue would have the slightest impact on the US economy. Following the Brexit vote, it was mentioned by record numbers of consumers, especially high-income consumers," Bloomberg reported, citing Richard Curtin, the Michigan survey’s director.

Moreover, respondents expected consumer prices to pick up pace by 2017, rising to 2.8 percent, from 2.6 percent in the June survey. Over the course of ten years, consumers expect inflation to rise at a rate of 2.6 percent.

Meanwhile, slightly fewer Americans reported recent gains in finances, the least since 2007, while others said their balance sheets had deteriorated. Moreover, uncertainty still prevails after the June 23 referendum that sent global markets into a tailspin and still poses threats that are likely to negatively impact business decisions and in turn, weigh on consumer sentiment.