University of Michigan Consumer Sentiment (final) for July 51.5 vs. 51.1 expectation


University of Michigan rebounds slightly

Sentiment data from the University of Michigan is available (final) for July:

  • preliminary report
  • consumer sentiment 51.5 vs. 51.1 estimate and 50.0 preliminary
  • current conditions 58.1 vs. preliminary 53.8
  • expectations 47.3 vs. preliminary 47.5
  • inflation over one year 5.2% against 5.3% preliminary. Last month 5.2%
  • Inflation over 5 years 2.9% against 3.1% preliminary. Last month 2.8%

Final sentiment from the University of Michigan came in slightly stronger than the estimate and higher than the preliminary. However, the data remains close to historically low levels.

Current conditions were also higher and above last month’s 57.1. The expectations index, however, remained close to the preliminary and last month’s levels.

Inflation

Inflation

Inflation is defined as a quantitative measure of the rate at which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general price level where a given currency is effectively buying less than it has in previous periods. In terms of valuation of strength or currencies, and by extension foreign currencies, inflation or its measures are extremely influential. Inflation stems from the global creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply relative to the wealth produced (measured with GDP). This thus generates pressure from demand on a supply that is not increasing at the same rate. The consumer price index then increases, generating inflation. How Does Inflation Affect Forex? The level of inflation has a direct impact on the exchange rate between two currencies on several levels. This includes purchasing power parity, which attempts to compare the different purchasing power of each country according to the general level of prices. By doing so, it helps to determine the country with the most expensive cost of living. The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates in the forex market. Interest rates are also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on the exchange. Conversely, too low inflation (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the foreign exchange market.

Inflation is defined as a quantitative measure of the rate at which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general price level where a given currency is effectively buying less than it has in previous periods. In terms of valuation of strength or currencies, and by extension foreign currencies, inflation or its measures are extremely influential. Inflation stems from the global creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply relative to the wealth produced (measured with GDP). This thus generates pressure from demand on a supply that is not increasing at the same rate. The consumer price index then increases, generating inflation. How Does Inflation Affect Forex? The level of inflation has a direct impact on the exchange rate between two currencies on several levels. This includes purchasing power parity, which attempts to compare the different purchasing power of each country according to the general level of prices. By doing so, it helps to determine the country with the most expensive cost of living. The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates in the forex market. Interest rates are also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on the exchange. Conversely, too low inflation (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the foreign exchange market.
Read this term remains high but slightly lower than the preliminary 5.3% for one year. Five-year inflation expectations came in at 2.9%, which was lower than the preliminary estimate of 3.1%.

Joanne Hsu of the Inquiry Committee commented:

“July’s final reading showed little change in consumer sentiment from its all-time low in June. The one-year economic outlook fell to its lowest level since 2009. Global factors have eased somewhat, support for durable goods buying conditions, which remained close to the all-time low reached last month, and a modest decline in long-term inflation expectations. Inflation continued to dominate consumers’ attention and labor market expectations continued to weaken.The sentiment index for the month was the second lowest on record, and the slowdown in personal consumption spending in the second quarter came as no surprise.July’s final reading of the median inflation rate expected for the year ahead was 5.2%, little change from mid-month or to the previous two. Long-term expectations came in at 2.9%, remaining within the range of 2.9-3.1% seen over the past 11 months.

US stocks are trading near their highs for the day. The data is still bad enough to be good for the outlook for the Fed’s rate path, and was also better than expected (although still at historic lows). Bad is good in stocks at least for now:

  • The Dow Industrial Average is up 127 points or 0.39% at 32,652
  • The S&P index is up 37.36 points or 0.91% at 4109.13
  • The NASDAQ index is up 150 points or 1.23% 12312.94
  • Russell 2000 is still slightly lower at -0.25 points or -0.01% at 1872.77


cnbctv18-forexlive-benzinga

Not all news on the site expresses the point of view of the site, but we transmit this news automatically and translate it through programmatic technology on the site and not from a human editor.
Back to top button