US consumer sentiment index falls marginally
According to data provided by the University of Michigan, the US consumer sentiment index stood at 94.3 in June 2016, compared with 94.7 in the previous month. However, it beat the market expectation of 94. This index indicates that the assessments of current economic health have improved since July 2005. However, American consumers were less confident about future economic growth.
US (QQQ) (SPXL) consumers are expecting that, over the next five to ten years, the inflation rate will be in the range of 2.3%–2.5%. The performance of the consumer sentiment index generally shows the overall attitude of consumers towards spending, economic health, and employment. Consumers’ financial situation has shifted significantly, signaling that wage growth has improved since 2007.
The labor market
Wage growth is a key factor in consumer spending. Analysts’ expectations indicate that the demand outlook for the US economy (VFINX) (IVV) will increase. Corporates may increase the number of jobs in the near future. If the labor market shows an improvement, then it will drive consumer spending and inflation.
Inflation and growth in the job market are important factors that the Fed considers during the rate hike process. In February 2016, Fed policymakers softened their rate hike urgency due to the sluggish global (VTI) (VEU) environment. However, policymakers have hinted at a possible rate hike at the June 2016 monetary policy meeting. In the next part of this series, we’ll analyze Eurozone investor confidence.