Michigan Consumer Sentiment Preview: Growth, jobs and sentiment

The University of Michigan will release its preliminary Survey of Consumers for May on Friday May 17th at 8:30 am EDT, 12:30 pm GMT. The poll comprises three indexes--the Index of Consumer Sentiment, the Index of Current Economic Conditions and the Index of Consumer Expectations. Each release is revised once. The survey began in 1978.

Forecast

The Consumer Sentiment Index is expected to rise to 97.5 in May from 97.2 in April. The Current Conditions Index is predicted to edge lower to 112.2 from 112.3 in April. The Expectations Index will drop to 86.8 in May from 87.4 

Consumer sentiment and the underlying economy

American consumer optimism has returned to its range of the last two years after the volatility surrounding the government partial closure in January.

Since the election of 2016 the Michigan Index has ranged between 93.1 and 102.0 with the one exception of the January 2019 shutdown dip to 90.7.  The three post-closure reading 95.5 in February, 97.8 in March and 96.9 in April are in the middle of that spread.

Reuters

It is not surprising that sentiment regained form quickly.  Rising real wages and the proliferating job market have more import for most households than political theater in Washington. Extensive press coverage of the shutdown left a brief mark on sentiment in January, but it was of no lasting significance on consumers’ attitudes or the economic life of the country.

Payrolls have returned to trend following the February drop to 56,000. March produced 189,000 new jobs and April 263,000. The 12-month moving average completed a year above 200,000 monthly positions.

Reuters

Of equal or greater importance has been the jump in real wages brought about by the rise in hourly compensation and the drop in inflation.

Reuters

The unemployment rate of 3.6% and initial jobless claims at 212,250 in the latest week, both at 50 year lows, confirm what most American sense or experience. It is the best labor market in a generation.

Reuters

The US trade dispute with China has been running for almost 18 months and has had no discernable impact on consumer attitudes. The recent escalation is not yet two weeks old and though it would not have had time to work its way into the economic outlook it is doubtful, based on past performance, it will make any difference.

American eyes are firmly fixed at home and they like what they see.

When the survey asked about the longer term financial outlook, “60% reported in the April survey that they expected to be better off financially over the next five years. This was the highest proportion ever recorded, although the question was only asked sporadically from 1979 to 1985 and then consistently from 2011 onwards,” according to the statement of the Surveys of Consumers chief economist, Richard Curtin accompanying the April release.