Consumer confidence expected to dip – What to know in markets Tuesday

Data measuring consumers’ assessments of economic conditions will take center stage Tuesday, at the end of a bruising month for markets as the U.S.-China trade war escalated further.

Economists broadly expect that the Conference Board’s consumer confidence index for August retreated from July’s 8-month high, “reflecting the effect a volatile stock market has on consumer sentiment,” Morgan Stanley analyst Ellen Zentner wrote in a note Friday.

The Conference Board’s index will likely show a reading of 129.0 for August, down from July’s reading of 135.7, according to consensus economists polled by Bloomberg.

Consumers this month have had to contend with rapidly changing trade policies, with newly announced tariff raising the prospects of price increases on an array of consumer goods. The first day of the month, stocks sold off after President Donald Trump announced he would be imposing tariffs on $300 billion worth of Chinese imports, at a rate that was recently raised to 15%. Taxes on other Chinese goods are also set to increase.

For the month-to-date, the major stock indices have seen three sessions of 2% or greater declines, amid the whipsawing trade headlines. In bond markets, the yields between the 2-year note and 10-year bond have flirted with inversions several times throughout August, with the reliable recessionary harbinger stoking fears of a downturn.

The Conference Board’s consumer confidence report follows weak results from the University of Michigan’s closely watched survey of consumers released earlier this month. The preliminary monthly reading showed that consumer sentiment fell to the lowest level since the start of the year in August. The declines extended across indices tracking both current and future economic conditions, with the index measuring consumers’ expectations for upcoming conditions recording more than twice the decline as the index tracking measuring sentiment toward current conditions.

Consumer confidence is expected to have fallen in August from July, according to consensus economists. (Photo by Eduardo MunozAlvarez/VIEWpress/Corbis via Getty Images)

The University of Michigan survey results were weighed down by mounting concerns over an increase in tariffs on Chinese imports, Richard Curtin, University of Michigan surveys of consumers chief economist, said at the time. And even the Federal Reserve’s first rate cut in more than a decade – which had been deployed in part as a means of helping to mitigate economic pressures caused by the trade war – did little to prop up consumer sentiment.

“The main takeaway for consumers from the first cut in interest rates in a decade was to increase apprehensions about a possible recession,” Curtin wrote. “Consumers concluded, following the Fed’s lead, that they may need to reduce spending in anticipation of a potential recession.”

That said, the consumer has so far remained a pillar of strength for the U.S. economy, even as other areas including the manufacturing sector softened. Consumer expenditures rose the most since the fourth-quarter of 2017 during the second quarter of 2019, helping offset weakness in business investment.

“Consumer indicators will be closely monitored for signs of continued resilience as household demand is proving to be the lynchpin of extended economic expansion,” Sam Bullard, Wells Fargo senior economist, wrote in a note.

Other key economic data set for release Tuesday includes the S&P CoreLogic Case-Shiller home price index. The 20-city composite index – measuring home price gains across 20 major metropolitan areas – is expected to have risen just 2.30% in June, down from the 2.39% gain logged in May. Nationally, home prices are expected to have risen 3.3% year-over-year in July, down from a 3.43% annual gain in June.

Companies reporting quarterly earnings results Tuesday include the J.M. Smucker Company (SJM) before market open, along with the Hewlett Packard Enterprise Company (HPE) and Autodesk (ADSK) after market close.

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

Read more from Emily:

Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn, and reddit.

Read the latest financial and business news from Yahoo Finance