Michigan Consumer Sentiment: June Preliminary Sees Improvement

The June Preliminary came in at 78.9, up from the May Final. Investing.com had forecast 75.0.

Surveys of Consumers chief economist, Richard Curtin, makes the following comments:

Consumer sentiment posted its second monthly gain in early June, paced by gains in the outlook for personal finances and more favorable prospects for the national economy due to the reopening of the economy. The turnaround is largely due to renewed gains in employment, with more consumers expecting declines in the jobless rate than at any other time in the long history of the Michigan surveys. Despite the expected economic gains, few consumers anticipate the reestablishment of favorable economic conditions anytime soon. Bad times financially in the economy as a whole during the year ahead were still expected by two-thirds of all consumers, and a renewed downturn was anticipated by nearly half over the longer term. The most often cited cause of a renewed downturn is a resurgence in the spread of the coronavirus, and the most often cited cause of a slow economic recovery is the financial damage from persistently high unemployment. Each of these factors have increased the uncertainty consumers now attach to their expectations. The resulting record level of income uncertainty has had a significant impact on consumers' willingness to make discretionary purchases, although uncertainty has slightly eased recently (see the chart). Importantly, these concerns have also been mitigated by deep discounts on prices and interest rates. NBER's cyclical peak in February and recession call was no surprise to consumers: during the past three months 89% to 95% have judged the economy in decline, up from the recent low of 24% in January of 2020. [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.

 

To put today's report into the larger historical context since its beginning in 1978, consumer sentiment is 8.6 percent below the average reading (arithmetic mean) and 15.3 percent below the geometric mean. The current index level is at the 29th percentile of the 510 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 6.6 point increase 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.

 

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.

 

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).

 

The general trend in the Michigan Sentiment Index after the Financial Crisis lows was one of slow improvement.