Michigan Consumer Sentiment: March Preliminary Exceeds Expectations

Transcription

1 Michigan Consumer Sentiment: March Preliminary Exceeds Expectations March 16, 2018 by Jill Mislinski of Advisor Perspectives The University of Michigan Preliminary Consumer Sentiment for March came in at 102.0, up 2.3 from the February Final reading of Investing.com had forecast Surveys of Consumers chief economist, Richard Curtin, makes the following comments: Consumer sentiment rose in early March to its highest level since 2004 due to a new all-time record favorable assessment of current economic conditions. All of the gain in the Sentiment Index was among households with incomes in the bottom third (+15.7), while the economic assessments of those with incomes in the top third posted a significant monthly decline (-7.3). The decline among upper income consumers was focused on the outlook for the economy and their personal finances. Consumers continued to adjust their expectations in reaction to new economic policies. In early March, favorable mentions of the tax reform legislation were offset by unfavorable references to the tariffs on steel and aluminum-each was spontaneously cited by one-in-five consumers. Importantly, near term inflation expectations jumped to their highest level in several years, and interest rates were expected to increase by the largest proportion since These trends have prompted consumers to more favorably cite buying as well as borrowing in advance of those expected increases. While income gains are still anticipated, the March survey found that the size of the expected income increase returned to the lows recorded in the past year. Among the top-third income households, income expectations fell more and inflation expectations rose more; as these households account for more than half of all consumption expenditures, the data suggest that the relative lull in consumption in the 1st quarter may persist for another quarter.[more...] See the chart below for a long-term perspective on this widely watched indicator. Recessions and real GDP are included to help us evaluate the correlation between the Michigan Consumer Sentiment Index and the broader economy. Page 1, 2018 Advisor Perspectives, Inc. All rights reserved.

2 To put today's report into the larger historical context since its beginning in 1978, consumer sentiment is 18.8 percent above the average reading (arithmetic mean) and 20.2 percent above the geometric mean. The current index level is at the 91st percentile of the 483 monthly data points in this series. Note that this indicator is somewhat volatile, with a 3.0 point absolute average monthly change. The latest data point saw a 2.3 percent change from the previous month. For a visual sense of the volatility, here is a chart with the monthly data and a three-month moving average. Page 2, 2018 Advisor Perspectives, Inc. All rights reserved.

3 For the sake of comparison, here is a chart of the Conference Board's Consumer Confidence Index (monthly update here). The Conference Board Index is the more volatile of the two, but the broad pattern and general trends have been remarkably similar to the Michigan Index. Page 3, 2018 Advisor Perspectives, Inc. All rights reserved.

4 And finally, the prevailing mood of the Michigan survey is also similar to the mood of small business owners, as captured by the NFIB Business Optimism Index (monthly update here). Page 4, 2018 Advisor Perspectives, Inc. All rights reserved.

5 The general trend in the Michigan Sentiment Index since the Financial Crisis lows was one of slow improvement. The survey findings saw a jump in late 2016 with improvements that have continued through present. The next update to this report will be for the March final data and will be released March 29. Page 5, 2018 Advisor Perspectives, Inc. All rights reserved.