Consumer confidence rises to highest level since January

Consumers became more confident during the first half of August than at any point since January, according to the Survey of Consumers conducted by the University of Michigan.

The Index of Consumer Sentiment jumped 4.5% from last month’s 93.4 to 97.6 at the beginning of August. This is also up 8.7% from 89.8 in August 2016.

“Consumer confidence rose in the first half of August to its highest level since January due to a more positive outlook for the overall economy as well as more favorable personal financial prospects,” Survey of Consumers Chief Economist Richard Curtin said.

“The two component indices moved in opposite directions, with the Current Conditions Index falling slightly from its decade peak, and the Expectations Index posting a more substantial rebound,” Curtin said. “As with the overall Sentiment Index, the component indices nearly regained the peak levels recorded earlier in 2017.”

An article by Jill Mislinski for Advisor Perspectives explains what this 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.

The Current Economic Conditions index slipped 2.1% to 111 at the beginning of August, down from 113.4 in July. This is still up 3.7% from 107 last year.

But the Index of Consumer Expectations increased significantly, soaring 10.6% from 80.5 in July to 89 at the beginning of August. This is also up 13.1% from 78.7 last year.

However, these results do not include most American’s sentiment from after the recent incidents in Charlottesville, Virginia.

“Too few interviews were conducted following Charlottesville to assess how much it will weaken consumers’ economic assessments,” Curtin said. “The fallout is likely to reverse the improvement in economic expectations recorded across all political affiliations in early August.”

“Moreover, the Charlottesville aftermath is more likely to weaken the economic expectations of Republicans, since prospects for Trump’s economic policy agenda have diminished,” he said.

However, while sentiment among Republicans could decrease, Curtin explained the partisan gap in confidence is expected to persist.

“Nonetheless, the partisan difference between the optimism of Republicans and the pessimism of Democrats is still likely to persist, with Independents remaining as the bellwether group,” he said. “At this point, the data continue to indicate a gain of 2.4% in personal consumption expenditures in 2017.”

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