Worries about rising interest rates and falling stock prices dinged US consumer sentiment in early July, while other data showed a firm rise in wholesale prices, which could make the Federal Reserve more comfortable reducing its monetary stimulus.
Reuters reported that the preliminary reading for the Thomson Reuters/University of Michigan’s index of consumer sentiment edged down to 83.9 from 84.1 in June. The reading, released on Friday, fell short of forecasts although it remained near its highest level in almost six years.
“The collective mood of consumers may have slipped modestly but still remains upbeat,” said Jim Baird, an investment officer for Plante Moran Financial Advisors in Kalamazoo, Michigan.
The decline came after a series of signals from the Fed that it was getting closer to ending a bond-buying program, leading to a selloff in stocks in June and a surge in mortgage rates.
However, stocks have since recovered on reassurances from the Fed that interest rate hikes are a long way off, and Friday’s data was consistent with the view that economic growth will accelerate toward the end of the year.
The decline in sentiment was more pronounced among upper-income consumers who worried about rising rates.
Some of those worries could be positive signals for near-term economic growth. One in five households with incomes in the top third said it was better to borrow before mortgage rates rose further.
While consumers worried about the future, they were much more sanguine about the present. The barometer of current economic conditions rose to its highest level since July 2007.
Investors on Wall Street were largely unfazed by the data and stock prices were little changed after closing at a record high a day earlier. US Treasuries prices held onto gains chalked up earlier in the day.
A separate report showed US producer prices rose more than expected in June, which some analysts took as a sign that a worrisome downward trend in inflation might be leveling out.
The Labor Department said its seasonally adjusted producer price index increased 0.8 percent last month, the largest gain since September.