Sentiment Declines As Inflation Expectations Rise

From U.Michigan, preliminary results for September:

Figure 1: U.Michigan Consumer Sentiment, adjusted using Cummings-Tedeschi correction (blue, left scale), expected 1 year inflation, % (brown, right scale).  Red dashed line at “Liberation Day”, purple dashed line at US-Iran war. Source: U.Michigan, Cummings and Tedeschi (2024), author’s calculations.

After incorporating the Cummings-Tedeschi adjustment, the Michigan survey lies between the Conference Board and Gallup measures (standardized).

Figure 2: U.Michigan Economic Sentiment, using Cummings Tedeschi adjustment (blue), Conference Board Confidence Index (brown), Gallup Confidence (green), all demeaned and divided by standard deviation 2021M01-2025m02. Red dashed line at “Liberation Day”, purple dashed line at US-Iran war. Source: UMichigan, Gallup, Conference Board, Cummings and Tedeschi (2024), and author’s calculations.

That being said, it looks like sentiment/confidence is continuing to trace the downward trend shown in August’s numbers.