Consumer Sentiment:  Lower Income Households Drive Gains

March 16, 2018
Bottom Line: Consumer sentiment jumped in early March as taxpayers started to understand what the new code meant for them. The current conditions component hit a record high. However, the survey noted this was almost entirely driven by lower income consumers: “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.” This highlights one potential scenario for consumption — could lower income households save more and/or accelerate their spending less than most expect at an aggregate level? While still too early to tell, this makes the gap between sentiment and retail sales more important to watch than ever. Consumer Sentiment ROSE by 2.3 points in early March to 102.0%, compared with market expectations for a decrease to 99.3%. With this month's modest increase, sentiment is now 5.3% ABOVE its year ago level. Current Conditions ROSE by 7.9 points to 122.8%. This is 8.5% ABOVE their year ago level. Consumer Expectations FELL by 1.4 points to 88.6%. Despite this month's slight decline, expectations are 2.4% ABOVE its year ago level. 1-year ahead inflation expectations were higher at 2.90%, while 5-year expectations were unchanged at 2.50%