March final U Mich consumer sentiment 101.4 vs 102.0 expected

March final U Mich consumer sentiment 101.4 vs 102.0 expected

The final reading on consumer sentiment from the University of Michigan

  • Prelim was 102.0
  • Prior was 99.7
  • Highest reading since 2004
  • Current conditions 121.2 vs 122.8 prelim
  • Expectations 88.8 vs 88.6 prior
  • 1-year inflation 2.8% vs 2.9% prelim
  • 5-year inflation 2.5% vs 2.5% prelim

The survey blamed the dip from the prelim number on trade worries.

“Consumer sentiment at month’s end was marginally below the mid-month
reading due to uncertainty about the impact of the proposed trade
tariffs. The Sentiment Index, however, still reached the highest level
since 2004, and the Current Conditions Index set a new all-time peak.
Importantly, all of the March gain in the Sentiment Index was among
households with incomes in the bottom third (+14.1); those in the middle
third were unchanged, while the Index fell among households in the top
third (-5.6). Households with incomes in the top third cited
significantly greater concerns with government economic policies than
last month, especially trade policies, with net references falling from
+31 to just +1, offsetting their positive reactions to tax policies. The
consensus expectation among consumers is that interest rates will
increase in the foreseeable future. While consumers view the current
level of interest rates as still relatively low, they understand that
interest rate hikes are intended to dampen the future pace of economic
growth. Their reaction will both emphasize borrowing-in-advance of
those expected increases as well as heighten their precautionary savings
motives. The trade-off between spending and saving will crucially
depend on the pace of future interest rate hikes compared with the pace
of income growth. It is likely that income growth will initially
dominate, tilting consumers’ motives more toward spending than saving.
Overall, the data are consistent with a growth rate of 2.6% in
consumption from mid-2018 to mid-2019.”

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