A recent reading of the consumer-sentiment index (CSI) released by the University of Michigan has revealed that consumer confidence in the United States has reached its lowest level since 2012, as a consequence of the US-China trade war.
While in July, the results of the reading were very positive, with more than 98.4 of people saying that they feel good about the US economy and find themselves as satisfied customers, the August reading has fallen by more than almost nine percent (8.7%).
The increasing political tensions between the United States and China, and the constant increase in tariffs for import and export between the two countries is the main reason behind the significant decrease in consumer confidence. The trade war is also a prerequisite for a possible recession, which has made consumers more conservative.
The CSI is basically calculated by subtracting the percentage of unfavorable consumer replies from the percentage of favorable ones. To calculate the CSI, first compute the relative scores (the percent giving favorable replies minus the percent giving unfavorable replies, plus 100) for each of the five index questions.
Consumer-sentiment index and the trade war
The University of Michigan’s consumer-sentiment index is one of the most important statistics tools when it comes to following and predicting trends in the US economy. The recent drop in consumer confidence is a serious red flag for the economic prosperity of the country and shows a possibility for a gradual shift towards a more conservative consumer behavior.
The trade war between the US and China is a very worrying political and economic situation, as it affects numerous sectors, and not only import and export. There has been a backlash of negative consequences following the rise in tariffs.
One of the most unbelievable effects of the trade war is the recent action taken by some intelligence agencies in the US. According to university representatives, the tension between the US and China has pushed the FBI towards requesting lists with all Chinese nationals attending American universities. According to many, this is a violation of privacy, and the FBI should not be taking up such tactics.
