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Consumer Sentiment: Sharp Increase Across Demographics and Politics

October 13, 2017

Bottom Line: The University of Michigan's preliminary survey index suggested consumer sentiment reached its highest level since early 2004. Counter to previous jumps, the gains extended across all income subgroups and political affiliations, according to the survey's economist. Both the current conditions and the expectations components hit cycle highs.

On the qualitative side, the survey noted that while the results suggest greater optimism,

"it also reflects an unmistakable sense among consumers that economic prospects are now about as good as could be expected."

The survey's economist goes on to opine:

"Nonetheless, consumers anticipate low unemployment, low inflation, small increases in interest rates, and most importantly, modest income gains in the year ahead. It is this acceptance of lackluster growth rates in personal income and in the overall economy that signifies that consumers have accepted, however reluctantly, limits on the pace of improving prospects for living standards."

While we don't usually add the less quantitative metrics to our reports, we found the comments interesting, particularly as we continue to look for the stronger survey data to come through into stronger retail sales, something we would normally see after nearly a year of stronger survey data. This morning's retail sales report showed little impact.

Consumer Sentiment ROSE by 6.0 points in early October to 101.1%, compared with market expectations for a decrease to 95.0%. With this month's moderate increase, sentiment is now 15.9% ABOVE its year ago level.

Current Conditions ROSE by 4.7 points to 116.4%. This is 12.8% ABOVE their year ago level.

Consumer Expectations ROSE by 6.9 points to 91.3%. With this month's moderate increase, expectations are 18.9% ABOVE its year ago level.

Article by Contingent Macro Advisors