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September University of Michigan Consumer Confidence Index Declines, Hurricane Impact Significant

The preliminary September University of Michigan consumer confidence index reading declined to 95.3 from the previous reading of 96.8 and below consensus expectations of 95.1, although there was still an annual increase of 4.5%.

The Current Economic Conditions index strengthened to 113.9 from 110.9. This represented a 9.3% increase over the year and the strongest reading since November 2000.

In contrast, the index of Consumer Expectations reversed August’s gain with a decline to 83.4 from 87.7 previously.

There was a significant impact on expectations from damage caused by hurricanes Harvey and Irma and there was a more robust reading for those respondents who were not affected by the hurricanes.

The data overall continues to suggest a firm trend in consumer spending in the short term.

The 1-year inflation expectations index increased to 2.7% from 2.6% previously which was the highest reading since February while the 5-year expectations index increased to 2.6% from 2.5% and equalled the 2017 high.

The small increase in inflation expectations should provide some comfort to the Federal Reserve, lessening fears that lower expectations will become entrenched.

The dollar made some headway after the data with USD/JPY at 110.90 from 110.80 as Treasuries dipped lower with the 10-year yield back above 2.20%.