Consumer Sentiment:  Nearing Longest Cycle On Record, Watch Expectations

Bottom Line: Consumer sentiment was higher than expected in the second half of December as the current conditions index showed consumers were mostly unfazed by equity market declines. This survey was taken prior to the the probability of a government shutdown looked as high as it does today. Overall consumer sentiment remains near record highs with only the 1964-65 and 1997-2000 periods eclipsing this one. That said, there are hints of less positive trends in the data that bear watching -- the consumer expectations index has lost upward momentum and consumers reported more negative than positive news about job prospects for the first time in two years. Consumer Sentiment was REVISED UP by 0.8 points in late December to 98.3%, compared with market expectations for a small decrease to 97.4%. Sentiment has deteriorated by -1.8 points over the past 3 months. With this month's slight increase, compared to November's final level of 97.5%, sentiment is 2.5% ABOVE its year ago level. Current Conditions were REVISED UP by 3.8 points to 116.1%. Current conditions are now 2.0% ABOVE their year ago level. Consumer Expectations were REVISED DOWN by 1.1 points to 87.0%. Despite this month's slight decline, compared to November's final level of 88.1%, expectations are 3.2% ABOVE their year ago level.