Americans remain economically confident despite recent hurricane damage

Consumer sentiment decreased slightly in September, but showed our concerns over hurricanes Harvey and Irma are rapidly fading, according to the Survey of Consumers conducted by the University of Michigan.

The Index of Consumer Sentiment decreased 1.8% from 96.8 in August to 95.1 in September. However, this was up 4.3% from 91.2 last year. During the first half of September, the index had fallen to 95.3.

“Consumer sentiment remained largely unchanged from the slightly lower level recorded at mid-month,” Survey of Consumers Chief Economist Richard Curtin said. “The resilience of consumers has again been demonstrated as concerns about the impact of the hurricanes on the national economy have quickly faded.”

“Given that the survey was able to reach most households in Florida and Texas in late September, it should be no surprise that small declines were recorded in the current financial situation of households,” Curtin said.

An article by Jill Mislinski for Advisor Perspectives explains what this confidence level means historically:

The Michigan average since its inception is 85.4. During non-recessionary years the average is 87.6. The average during the five recessions is 69.3.

Over the past year, although several issues arose that could have derailed the overall confidence level, Americans remained optimistic, Curtin stated. Some of those issues include the unprecedented partisan divide, North Korea, Charlottesville and the hurricanes.

“Confidence has nonetheless remained very favorable, moving sideward in a very narrow positive range,” Curtin said. “In the first nine months of 2017, the Sentiment Index averaged 96.2, just ahead of averages of 91.9 and 92.9 recorded in the prior two years, making 2017 the highest recorded since 2000.”

“To be sure, the recent Sentiment levels are still well below the average of 105.3 recorded from 1997 to 2000, which has also been reflected in slower overall growth rates in consumer spending,” he said.

The Current Economic Conditions index increased to 111.7 in September. This is up 0.7% from 110.9 last month and 7.2% from 104.2 last year.

However, the Index of Consumer Expectations created a drag, dropping 3.8% from last year’s 87.7 to 84.4 in September. This is still up 2.1% from 82.7 in September last year.

“Needless to say, resilience is an ineffable quality whose appearance or disappearance is difficult to predict in advance,” Curtin said. “While consumer resilience has lowered precautionary saving motives and increased willingness to spend and incur debt, those changes will still be constrained by slower income growth and consumers who are still more risk averse.”

“Overall, consumer expenditures are expected to increase by 2.6% in 2017 and in the first half of 2018,” he said.

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