Michigan Consumer Sentiment: Remains Favorable In September

The September Final came in at 93.2, up 3.4 from the August Final reading. Investing.com had forecast 92.0.

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

Consumer sentiment continued to post small increases throughout September due to more favorable income trends, especially among middle income households. The overall trends in the Sentiment Index remain quite favorable, but show signs of a slow erosion. The Sentiment Index for the 3rd quarter of 2019 (93.8) was only slightly below the averages for the first half of 2019 (96.5) as well as for 2017 and 2018 (97.6). Despite the high levels of confidence, consumers have also expressed rising levels of economic uncertainty. Some of these concerns are rooted in partisanship, some due to conditions in the global economy (Brexit, Iran, Saudi Arabia, China), and some are tied to domestic economic policies. Trade policies have had the greatest negative impact on consumers, with a near record one-third of all consumers negatively mentioning trade policies in September when asked to explain in their own words the factors underlying their economic expectations (see the chart). These and other policy concerns have so far been held in check by positive finances, although fewer consumers now anticipate higher wages or lower rates of unemployment in the year ahead. Impeachments divert the attention of the President and Congress away from economic policies, and may become conflated with partisan strategies. While the outlook is for a slower but positive growth in consumption, that outlook is contingent on only modest impacts on jobs and wages from the array of potential issues facing the economy. [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 Friday's report into the larger historical context since its beginning in 1978, consumer sentiment is 8.1 percent above the average reading (arithmetic mean) and 9.3 percent above the geometric mean. The current index level is at the 67th percentile of the 501 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 3.4 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 since the Financial Crisis lows was one of slow improvement. The survey findings have neared the pre-recession peak.

The next update to this report will be for the October preliminary data and will be published on October 11.