Michigan Consumer Sentiment: August Preliminary Highest Since January

The University of Michigan Preliminary Consumer Sentiment for August came in at 97.6, up from the July Final reading of 93.4 and its highest since January. Investing.com had forecast 94.0.

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

Consumer confidence rose in the first half of August to its highest level since January due to a more positive outlook for the overall economy as well as more favorable personal financial prospects. The two component indices moved in opposite directions, with the Current Conditions Index falling slightly from its decade peak, and the Expectations Index posting a more substantial rebound. As with the overall Sentiment Index, the component indices nearly regained the peak levels recorded earlier in 2017. Too few interviews were conducted following Charlottesville to assess how much it will weaken consumers' economic assessments. The fallout is likely to reverse the improvement in economic expectations recorded across all political affiliations in early August. Moreover, the Charlottesville aftermath is more likely to weaken the economic expectations of Republicans, since prospects for Trump's economic policy agenda have diminished. Nonetheless, the partisan difference between the optimism of Republicans and the pessimism of Democrats is still likely to persist, with Independents remaining as the bellwether group. At this point, the data continue to indicate a gain of 2.4% in personal consumption expenditures in 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 13.9 percent above the average reading (arithmetic mean) and 15.3 percent above the geometric mean. The current index level is at the 87th percentile of the 476 monthly data points in this series.

The Michigan average since its inception is 85.6. During non-recessionary years the average is 87.8. The average during the five recessions is 69.3. So the latest sentiment number puts us 28.3 points above the average recession mindset and 9.8 points below the non-recession average.