Michigan Consumer Sentiment: February Final Remains Positive

The University of Michigan Final Consumer Sentiment for February came in at 93.8, up 2.6 from the January Final reading. Investing.com had forecast 95.8.

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

Although sentiment was still above last month's low, the bounce-back from the end of the Federal shutdown faded in late February. While the overall level of confidence remains diminished, it is still quite positive. Nonetheless, aside from last month, it was only lower in one month since Trump's election, but barely, at 93.4 in July 2017. Consumers continued to react to the Fed's pause in raising interest rates, balancing the favorable impact on borrowing costs against the negative message that the economy at present could not withstand another rate hike. Long-term inflation expectations remained near the lowest level recorded in the past half century. Among households with incomes in the top third, the reduction in inflation expectations was even greater, falling to an all-time low of just 1.9%. Upper income households also anticipated a 3.0% gain in incomes, a gain well above those with incomes in the bottom two-thirds. This meant that real income expectations among upper income households rose to the highest level since the peaks recorded in the expansions in the 1980's and 1990's (see the chart). Note that no improvement in real income expectations was observed among households with incomes in the bottom two-thirds of the income distribution. The data indicate that personal consumption expenditures will grow by 2.6% in 2019 and the strength in consumer spending will mean that the expansion is expected to set a new record length by mid year. [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.

Michigan Consumer Sentiment

To put today's report into the larger historical context since its beginning in 1978, consumer sentiment is 8.9 percent above the average reading (arithmetic mean) and 10.2 percent above the geometric mean. The current index level is at the 70th percentile of the 494 monthly data points in this series.

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