Michigan Consumer Sentiment: September Final Up Slightly

The University of Michigan Final Consumer Sentiment for September came in at 91.2, up slightly from the Preliminary reading. Investing.com had forecast 90.0.

Surveys of Consumers chief economist, Richard Curtin, makes the following comments:

Confidence edged upward in September due to gains among higher income households, while the Sentiment Index among households with incomes under $75,000 has remained at exactly the same level for the third consecutive month. Importantly, the data provide no evidence of an upward trend as the average level of the Sentiment Index since the start of 2016 is nearly identical with the September level (91.4 versus 91.2). All of the September gains were concentrated in the Expectations Index, while assessments of current economic conditions were slightly less favorable. Fewer reports of recent income gains were counterbalanced by an uptick in income gains expected during the year ahead. The larger recent gains among upper income households was partly due to continued declines in their inflation expectations. Buying plans edged downward mainly due to the declining availability of price discounts. Real personal consumption expenditures can be expected to increase by 2.7% through mid 2017. [More...]

See the chart below for a long-term perspective on this widely watched indicator. Recessions and real GDP are included to help us evaluate the correlation between the Michigan Consumer Sentiment Index and the broader economy.

Michigan Consumer Sentiment

To put today's report into the larger historical context since its beginning in 1978, consumer sentiment is 5.1 percent above the average reading (arithmetic mean) and 6.4 percent above the geometric mean. The current index level is at the 53rd percentile of the 465 monthly data points in this series.

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. So the latest sentiment number puts us 21.9 points above the average recession mindset and 3.6 points above the non-recession average.

Note that this indicator is somewhat volatile, with a 3.0 point absolute average monthly change. The latest data point saw a 1.4 change from the previous month. For a visual sense of the volatility, here is a chart with the monthly data and a three-month moving average.

3-Month Moving Average

For the sake of comparison, here is a chart of the Conference Board's Consumer Confidence Index (monthly update here). The Conference Board Index is the more volatile of the two, but the broad pattern and general trends have been remarkably similar to the Michigan Index.

Consumer Confidence

And finally, the prevailing mood of the Michigan survey is also similar to the mood of small business owners, as captured by the NFIB Business Optimism Index (monthly update here).

NFIB Optimism

The general trend in the Michigan Sentiment Index since the Financial Crisis lows has been one of slow improvement.The survey findings since December 2015 saw gradual decline followed by a bounceback later in the year, with January 2015 remaining the interim peak.