U.S. consumer confidence held up better than expected during the first half of August, a new report showed, even as President Donald Trump escalated his trade war with China, roiling stock-market investors.
The Conference Board's main index of consumer confidence slipped to a reading of 135.1 based on the latest survey, which had a cutoff date of Aug. 16, according to a press release Tuesday. Economists had projected that the index would fall to 130, from 135.7 registered at the end of July.
The survey period includes Trump's threat of increased tariffs on Aug. 1, as well as China's decision to let its currency, the yuan, weaken past a key level of 7 per U.S. dollar. Trump has accused China of intentionally weakening its currency to make exports more competitive in international markets, so within days of the yuan devaluation, his administration officially labeled the country as a currency manipulator.
But the survey doesn't cover the latest round of volleys in the dispute, including China's threat on Aug. 23 to impose higher tariffs on U.S. exports and a ferocious response by Trump pleading even more tariffs on Chinese goods.
"While other parts of the economy may show some weakening, consumers have remained confident and willing to spend," Lynn Franco, senior director of economic indicators at the Conference Board, said in the press release. "However, if the recent escalation in trade and tariff tensions persists, it could potentially dampen consumers' optimism regarding the short-term economic outlook."
Economists say the market turmoil wreaked by the tit-for-tat announcements has created such anxiety among business executives that they're delaying or canceling investments needed for future growth, such as building new plants, upgrading technology, buying new equipment or hiring more personnel.
Consumer confidence is closely monitored as an economic data point because it often translates to spending patterns and growth; consumer spending accounts for 68% of U.S. gross domestic product.
The latest confidence reading appears to conflict with a separate gauge published earlier this month by the University of Michigan showing a steep dropoff in consumer sentiment following Trump's early-August tweets on the trade war.
But based on the Conference Board's survey, consumers don't seem too bothered by it all.
Tony Bedikian, head of global markets at Providence, Rhode Island-based Citizens Bank, said in a phone interview that low unemployment -- the U.S. rate is close to its lowest in a half century -- and decent wage growth have kept household wallets growing, keeping consumers optimistic about their personal finances. That's despite headlines suggesting that the trade war is casting a pall over the economy.
"The consumer is still in really good shape," Bedikian said. "They're seeing the China and U.S. trade talks in the headlines, but as long as they have confidence in their jobs and their paychecks, the economy will continue to hum along."
Citizens Bank on Tuesday released its own "business conditions index" showing a second-quarter reading of 61.2, indicating an expansionary trend and pointing toward improved conditions for the next quarter, according to a press release from that bank. A reading below 50 would signify contraction.
"U.S. companies remain broadly in a growth mode powered by healthy fundamentals," the bank said.
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