Michigan Consumer Sentiment: February Final Inches Up, Better Than Forecast

The University of Michigan Final Consumer Sentiment for February came in at 96.3, down from the January Final reading of 98.5, but inched up from the February preliminary of 95.7. Investing.com had forecast 96.0.

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

While consumer confidence edged upward in late February, it remained slightly below the decade peak recorded in January. Overall, the Sentiment Index has been higher during the past three months than anytime since March 2004. Normally, the implication would be that consumers expected Trump's election to have a positive economic impact. That is not the case since the gain represents the result of an unprecedented partisan divergence, with Democrats expecting recession and Republicans expecting robust growth. Indeed, the difference between these two parties is nearly identical to the difference between the all-time peak and trough values in the Expectations Index - 64.6 versus 64.4. While the expectations of Democrats and Republicans largely offset each other, the overall gain in the Expectations Index was due to self-identified Independents, who were much closer to the optimism of the Republicans than the pessimism of the Democrats. (Note: the February Expectations Index was 55.5 among Democrats, 120.1 among Republicans, and 89.2 among Independents.) Since neither recession nor robust growth is expected in 2017, both extremes must eventually converge. Although the data indicate a growth rate of 2.7% in consumption during 2017, the data also indicate we can expect greater volatility and discretionary spending differences across subgroups.[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 12.6 percent above the average reading (arithmetic mean) and 13.9 percent above the geometric mean. The current index level is at the 84th percentile of the 470 monthly data points in this series.

The Michigan average since its inception is 85.5. During non-recessionary years the average is 87.7. The average during the five recessions is 69.3. So the latest sentiment number puts us 27.0 points above the average recession mindset and 8.6 points below the non-recession average.