(Bloomberg) -- If self-reinforcing recession fears are the greatest risk to the record-long U.S. expansion, as posited by Bank of America Corp. Chief Executive Officer Brian Moynihan, the latest consumer sentiment report hinted that those concerns may be starting to emerge.

“We have nothing to fear about a recession right now except for the fear of recession,” Moynihan said in a Bloomberg Television interview Friday. Recession risks are low because of steadfast household spending, which remains the backbone of the economy, he said.

Indeed, government figures this week showed retail sales advanced in July by a hearty 0.7%, the most in four months. Purchases in the so-called control group subset, often seen as a better indicator of underlying demand, rose an annualized 9.7% in the three months through July, indicating a solid start to the third quarter.

However, there are signs the mighty American consumer may soon take a respite. The University of Michigan’s confidence index slumped in August to a seven-month low amid growing concern about the economy. Details in the survey showed more consumers heard unfavorable news about business conditions, the trade deficit and the stock market.

The Michigan survey also showed a gauge of current conditions dropped to the weakest level since November 2016, while the measure of expectations saw its biggest one-month point slide since the end of 2012. While sentiment readings aren’t always an indicator of the direction of spending, the figures nonetheless raise the possibility that demand will level off.

JPMorgan Chase & Co. economist Jesse Edgerton said in a report Friday that the drop in sentiment helped push the firm’s economic data-based estimate of the probability of recession starting within a year to 45%, the highest since the aftermath of the government shutdown, from a recent low of 40% in July.

Ironically, after the Federal Reserve’s first interest-rate cut in a decade, consumers concluded that they may need to be more cautious about spending given that the move was designed to guard against a recession. Financial markets have grown increasingly volatile in the last two weeks, with the Dow Jones Industrial Average plunging 800 points on Wednesday, on fresh signals that global economic conditions were deteriorating further.

What’s more, the yield on the U.S. Treasury 10-year note briefly dipped below that on the 2-year note, an inversion that in the past has signaled a recession was on the horizon.

Against this backdrop of ugly global economic news and shaky financial markets is an American consumer who is benefiting from bigger wage gains. The government’s latest gross domestic product report showed wages and salaries in the first half of the year grew at the fastest pace in more than a decade on the heels of a still-robust job market.

That underlines Moynihan’s point about fear: The outlook for consumer spending could ultimately be determined by whether Americans let recession fears gain a bigger foothold in their psyche or whether fatter wallets will be enough for them to let the good times roll.

To contact the reporter on this story: Vince Golle in Washington at vgolle@bloomberg.net

To contact the editors responsible for this story: Scott Lanman at slanman@bloomberg.net, Jeff Kearns

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