US Consumer Sentiment Above Forecasts


The University of Michigan's consumer sentiment for the US was steady at 97.5 in December of 2018, the same as in the previous month and above market expectations of 97, preliminary estimates showed. In the last 2 years, consumer sentiment has been above 90, a pattern not seen since 1997 to 2000.

The gauge for consumer expectations declined to 86.1 from 88.1 in November while the current economic conditions subindex increased to 115.2 from 112.3 in November. Inflation expectations for the year ahead eased to 2.7 percent from 2.8 percent and the 5-year outlook fell to 2.4 percent from 2.6 percent. 

Consumer sentiment was unchanged from last month's reading and has remained at very favorable levels since the start of 2017. In the two years from January 2017 to December 2018, the Sentiment Index was consistently above 90.0, averaging 97.5, identical to the early December reading. The last time the Sentiment Index was consistently above 90.0 for at least as long was from 1997 to 2000, recording a four-year average of 105.3. There are a number of plausible causes for the difference in consumer optimism from the late 1990's to today, most of which revolve around job and wage prospects. As noted in last month's report, as long as job and income growth remain strong, rising prices and interest rates will not cause substantial cutbacks in spending. In the early December survey, however, consumers did mention hearing much more negative news about future job prospects. Moreover, most consumers understand that the goal of increasing interest rates is to slow the pace of economic growth. In past expansions, there was plenty of room between low and high interest rates to nudge up rates without damaging consumer spending. The gap has been squeezed to just a few percentage points and more caution is now warranted.

US Consumer Sentiment Above Forecasts


University of Michigan | Joana Taborda | joana.taborda@tradingeconomics.com
12/7/2018 3:10:13 PM