US consumer sentiment defies analysts and drops in July

Confidence is down in the US, according to the University of Michigan. Their consumer sentiment index fell from 84.1 to 83.9 in July. Economists had expected a rise to 85.0.

Amna Asaf, economist, Capital Economics:

The trivial drop in July's University of Michigan measure of US consumer confidence was probably a reaction to the decline in equity prices in late-June and early-July.

The expectations index, which normally reflects changes in both stock markets and gasoline prices, fell to a three-month low of 73.8, from 77.8.

Encouragingly, stock markets have since rallied by roughly 2% and gasoline prices are also drifting lower. All of the other determinants of confidence have also improved.

Overall, based on the historical relationship, the expectations index now suggests that third-quarter consumption growth could be almost as weak as the estimated 1.5% to 2.0% annualised gain in the second quarter.