US Michigan Consumer Sentiment Preview: Concerns about the future are driving the decline in sentiment


  • Consensus estimate predicts a small drop in October consumer sentiment.
  • Consumer confidence has not recovered from its late summer plunge.
  • Labor market and wages remain strong but their influence on sentiment  may be waning.

The University of Michigan will issue its preliminary Survey of Consumers for October on Friday October 11th at 14:00 GMT, 10:00 EDT.

The survey consists of three indexes--the Index of Consumer Sentiment, the Index of Current Economic Conditions and the Index of Consumer Expectations. Each result is revised once. The survey began in 1978.

Forecast

The Consumer Sentiment Index is expected to drop to 92.0 in October from 93.2 in September.  The Current Conditions Index is projected to slip to 107.5 in October from 108.5 the prior month. The Expectations Index is forecast to edge lower to 81.7 from 83.4.

Michigan and the Conference Board consumer surveys

The late summer decline in the major US consumer confidence measures occurred despite one of the strongest job and wage markets in decades, traditionally among the most important factors in consumer satisfaction.

The 8.6 point drop in the Michigan Sentiment index from July to August was the biggest in six years. 

The following month the Conference Board confidence score dipped to 125.1 from 134.2.

Reuters

Both indexes have returned to the lower limits of their ranges for the last two years. The Michigan index is back to the level of November 2016 before the prolonged rise that began with the presidential election.  

Michigan current condition and expectations indexes

The Michigan survey questions consumers about their sentiments in two time frames. Respondents are asked about their satisfaction with their current economic condition and about their expectations for where they will be in six months.  The split between the two sets of responses is instructive.

This year the index of current satisfaction has fallen 4.8 points, from 113.3 in March to 108.5 in September.  The index for expectations has fallen more than twice as much at 10.1 points. While one survey is not conclusive  the difference does provide insight into the concerns of American households.

Reuters

Retails sales

Consumers’ spending decisions come down on the current side of the above current conditions/expectations ledger. The retail sales control group category, which inform the GDP calculation, averaged a monthly increase of 0.733% from March through August. That was the highest average in 16 years. Consumption is being driven by the positive realities of jobs and wages whatever external factors are creating anxieties for American households.

Reuters

Conclusion

Consumer sentiment remains positive though at the low end of the elevated range of the last two years. The recent decline in sentiment is not normally associated with a labor market at full employment and with historically low jobless rates.    

External factors from politics in Washington to the trade dispute with China and even the European Brexit wrangle and the length of the economic expansion likely play a part in the plunge in attitudes.  Consumer sentiment took a similar dive in January when the partial government shutdown was making headlines for several weeks but recovered when the closure ended.

Consumers are optimistic but their concerns are realistic and rising. Attitudes will be determined by developments in the China trade argument and by the political drama being played out in the nation’s capital.

 

 

 

 

 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news

How do emotions affect trade?
Follow up our daily analysts guidance

Subscribe Today!    

Latest Forex Analysis


Latest Forex Analysis

Editors’ Picks

EUR/USD slides under 1.16 as US Retail Sales smash estimates

EUR/USD is trading under 1.16 after US Retail Sales smashed estimates with 0.7% in September. Treasury yields are rising. The risk-on mood continues to underpin the pair, as the ECB policymaker Wunsch dismisses inflation concerns. 

EUR/USD News

GBP/USD retreats below 1.3750 after US data

GBP/USD has pared some of its gains after US Retail Sales beat estimates, with the core group hitting 0.8% last month. Earlier, investors shrugged off dovish comments from two BOE members. 

GBP/USD News

XAU/USD slumps to $1,770 area on upbeat US data, surging US bond yields

Gold started the last day of the week on the back foot and extended its slide to a fresh daily low of $1,770 in the early trading hours of the American session pressured by the dollar's resilience and surging US Treasury bond yields.

Gold News

Crypto bulls on winning streak pushing for more

Bitcoin price favors bulls reaching $60,000 by the end of this week and onwards to new all-time highs by the end of next week. Ethereum price broke a bearish top line and could hit new all-time highs by next week in tandem with Bitcoin. 

Read more

Why is Tesla going up?

Tesla's (TSLA) stock price has finally pushed higher in a series of steady and sure moves. We had nearly given up on our bullish call with Tesla stock as it kept struggling around the $800 level.

Read more

Majors

Cryptocurrencies

Signatures