Michigan Consumer Sentiment: March Prelim Highest In A Year
The March Preliminary came in at 83.0, up 6.2 from the February Final. Investing.com had forecast 78.5. Since its beginning in 1978, consumer sentiment is 3.7 percent below the average reading (arithmetic mean) and 2.6 percent below the geometric mean.
Surveys of Consumers chief economist, Richard Curtin, makes the following comments:
Consumer sentiment rose in early March to its highest level in a year due to the growing number of vaccinations as well as the widely anticipated passage of Biden's relief measures. The gains were widespread across all socioeconomic subgroups and all regions, although the largest monthly gains were concentrated among households in the bottom third of the income distribution as well as those aged 55 or older. Over the past fifty years, the key age group that consistently led recoveries, but was the last age group to indicate a pending recession, was consumers under age 35 (see the featured chart).
The early March gains were not equally shared across all Index components, with consumers voicing no improvement in some key facets of consumer finances. In particular, consumers' judgements about their own financial situation posted no gains in early March, largely due to very small expected gains in household incomes over the next year. In contrast, prospects for the national economy improved significantly. Another important distinction involved greatly improved views of buying conditions for large household durables, but only marginal gains for vehicles and homes. Inflation expectations for the year ahead remained elevated, but consumers thought the inflation rate would fall back to lower levels over the longer term. Importantly, consumers thought that the interest rates they faced for mortgages and vehicle loans would rise during the year ahead. Overall, the data indicate strong growth in consumer spending during the year ahead, with the largest percentage gains for services, including travel and restaurants, and the smallest increases for vehicles and homes. [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 3.7 percent below the average reading (arithmetic mean) and 2.6 percent below the geometric mean. The current index level is at the 37th percentile of the 5189 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 6.2 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).