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U.S. University of Michigan consumer sentiment index falls in August

The U.S. University of Michigan consumer sentiment index dropped in August. The preliminary estimate showed that the index fell from 97.9 in July to 95.3 in August, coming below consensus expectations of a rise to 98. The drop in the headline figure was mainly due to a fall in the current conditions component that fell to 107.8.

The expectations part of the survey remained the same at 87.3. The big drop in current conditions was due to price changes, in particular consumers saw vehicle prices and home prices as least favourable since 1984 and 2006, respectively. It appears that consumers have become quite sensitive to even comparatively small price rises after being used to soft goods inflation for decades.

Furthermore, the unfavourable view on home prices as consistent with the falling home affordability evident in housing market data that has restricted home sales. On the inflation side of the report, one-year ahead inflation expectations remained unchanged at 2.9 percent, while the five-ten inflation expectations gauge rose by one-tenth to 2.5 percent.

“In all, today’s report showed that consumers perceive themselves to be worse off financially currently as a result of affordability issues related to big ticket consumer items and housing, but their assessment about the future remained unchanged”, stated Barclays in a research report.

At 20:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was slightly bearish at -58.3496. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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