University of Michigan Consumer Sentiment Index Jumps as Inflation Worries Fade

The price of groceries led the list, and 60 percent of respondents placed it among their top three—more, even, than the share that chose “inflation.” This isn’t exactly a new development. In 2002, Donovan told me, Italian consumers were convinced that prices were soaring power trend by nearly 20 percent even though actual inflation was a stable 2 percent. It turned out that people were basing their estimates on the cost of a cup of espresso, which had abruptly risen as coffee makers rounded their prices up after the introduction of the euro.

According to a new analysis by the Brookings Institution, from 1988 to 2016, the “sentiment” of economic-news coverage in mainstream newspapers tracked closely with measures such as inflation, employment, and the stock market. Then, during Donald Trump’s presidency, coverage became more negative than the legacyfx review economic fundamentals would have predicted. In other words, the media’s negativity could be both a reflection and a source of today’s economic pessimism. The preliminary report is generally released during the middle of the month and covers survey responses collected in the first two weeks of the month.

US Consumer Sentiment Jumps as Inflation Concerns Dissipate

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master’s in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

In February, sentiment among Democrats was 34 points higher than for Republicans. The Consumer Sentiment Index rose to 79.0 in the January 2024 survey, up from 69.7 in December and above last January’s 64.9. The Current Index rose to 81.9, up from 73.3 in December and above last January’s 68.5.

Several major economic indices and indicators can help investors and economists predict where the economy is headed. The Consumer Price Index (CPI), the Producer Price Index (PPI), and the Gross Domestic Product (GDP) all forecast the future strength of the U.S. economy. The Michigan Consumer Sentiment Index is another key indicator designed to illustrate the average U.S. consumer’s confidence level. This indicator is important to retailers, economists, and investors, and its rise and fall has historically helped predict economic expansions and contractions. Still, consumer sentiment remains 6 percent below its long-run average after the worst spike in inflation in four decades pushed up the cost of groceries, rent, gas, and other necessities, frustrating many consumers.

How Investors Can Use the CSI

Objectively, it’s hard to claim that the economy was in worse shape that month than it had been at those other cataclysmic times. US dollar retreats as risk appetite improves, but bullish trend persists amid Fed’s hawkish stance.Attention turns to upcoming economic data, with retail sales, jobless claims, and sentiment… For the second consecutive month, there was a broad consensus of higher sentiment across age, income, education and geography. Furthermore, consumers saw favorable developments throughout the economy as well, Hsu said. “For much of 2023, consumers had reserved judgment about the inflation slowdown and whether it would persist,” said U-M economist Joanne Hsu, director of the Surveys of Consumers. “Over the last two months, consumers have finally felt assured that their worst fears for the economy would not come to pass.

1. In contrast, in June 2022, 79% of consumers expected challenging times ahead for the economy.
2. After falling for months, it suddenly rebounded in December and January, posting its largest two-month gain in more than 30 years—even though the economy itself barely changed at all.
3. But mainstream media have also gotten more negative about the economy in recent years, regardless of who’s held the presidency.
4. In other words, the media’s negativity could be both a reflection and a source of today’s economic pessimism.
5. Because consumer spending accounts for about 68.1% of gross domestic product (GDP) in the U.S., the MCSI is regarded as one of many important economic indicators followed by businesses, policymakers, and participants in the investment community.

That is reasonable if you’re a Fed official focused on how to set interest rates, because energy and food prices are often extremely sensitive to temporary fluctuations (caused by, say, a drought that hurts grain harvests or an OPEC oil-­supply cut). But in practice, these measures overlook the prices that matter most to consumers. In recent weeks, most economic data has been positive, and has indicated that the economy is still growing, employers are hiring, and inflation is coming down. Growth reached 3.3 percent in the final three months of last year, much better than economists had forecast.

They have now developed into an ongoing, nationally representative survey based on telephonic household interviews. The Index of Consumer Expectations (a sub-index of ICS) is included in the Leading Indicator Composite Index published by the U.S. The media may be contributing to economic gloom for people of every political stripe. But mainstream media have also gotten more negative about the economy in recent years, regardless of who’s held the presidency.

How to Read the Michigan Consumer Sentiment Index

There is another story you can tell about consumer sentiment today, however, one that has less to do with what’s happening in grocery stores and more to do with the peculiarities of tribal identity. And a quarterly measure of CEO confidence by the Conference Board reached 53 in the first three months of this year, the first time it has topped 50 — when more CEOs are optimistic than pessimistic — in two years. A daily survey by Morning etoro x5 leverage Consult has increased 7 percent since the end of November. Less than one-third of consumers expect unemployment rates to rise in the year ahead, compared with 41% a year ago. Some kind of irreconcilable difference seemed to have opened up between public opinion and traditional markers of economic health, as many op-eds and news reports noted. Inflation hit 9 percent that month, and no one knew if it would go higher still.

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But the stories we tell ourselves are shaped by everything from the news we read to the political messages we hear to the identities we adopt. Will the place that it finally settles in come November matter to the election? The irony is that consumers spend a lot more, on average, on expensive, big-ticket items than they do on groceries or takeout, which means the prices we pay the most attention to don’t contribute very much to overall inflation numbers. (Less than a tenth of the average consumer’s budget is spent at the super­market.) Some measures of inflation—“core” and “supercore” inflation among them—­exclude food and energy prices altogether.

There was a tiny gain among independents, from 74.6 to 76.6, and a drop among Democrats, to 98.4 from 101.7. About 41% of consumers expect good times in the year ahead for business conditions, while 48% expect bad times. In contrast, in June 2022, 79% of consumers expected challenging times ahead for the economy. Because consumer spending accounts for about 68.1% of gross domestic product (GDP) in the U.S., the MCSI is regarded as one of many important economic indicators followed by businesses, policymakers, and participants in the investment community.

Consumer prices rose just 2.6 percent in December compared with a year ago, according to the Federal Reserve’s preferred inflation measure, though the better-known consumer price index picked up a bit in January. The survey queries consumers on their views of their own personal finances, as well as the short-term and long-term state of the U.S. economy. The consumer confidence measures were devised in the late 1940s by Professor George Katona at the University of Michigan.

The University of Michigan’s consumer sentiment index, released Friday, ticked up to 79.6 in February, from 79 in January. The small gain followed two months of sharp increases that were the largest in more than 30 years. How Americans feel could impact the presidential race this year, which will likely focus heavily on President Joe Biden’s economic record. In a recent poll commissioned by The Atlantic, respondents were asked what factors they consider when deciding how the national economy is doing.