US: Consumer Sentiment


Fri Nov 10 09:00:00 CST 2017

Consensus Consensus Range Actual Previous
Sentiment Index - Level 100.0 97.0 to 102.0 97.8 100.7

Highlights
Preliminary November consumer sentiment edged down to 97.8 from October's final reading of 100.7. Both current conditions and consumer expectations readings were lower. The losses however, were quite small as the sentiment index remained at its second highest level since January. Current conditions declined to 113.6 from 116.5 while expectations slid to 87.6 from 90.5. One year inflation expectations increased to 2.6 percent from October's 2.4 percent while five year expectations were unchanged at 2.5 percent.

Consumers (and policy makers) have four key concerns: prospective trends in jobs, wages, inflation and interest rates. An improving labor market was spontaneously mentioned by a record number of consumers in early November, and anticipated wage gains recorded their highest two-month level in a decade. These favorable trends were countered by a slight rise in year-ahead inflation expectations and a growing consensus that interest rates will increase during the year ahead.

Market Consensus Before Announcement
Underpinned by high employment and rising income prospects, the consumer sentiment index jumped in the preliminary October report to 101.1 for the best showing in 13 years before ending the month nearly as high, at 100.7. Econoday's consensus for preliminary November is 100.0.

Definition
The University of Michigan's Consumer Survey Center questions 500 households each month on their financial conditions and attitudes about the economy. Consumer sentiment is directly related to the strength of consumer spending. Consumer confidence and consumer sentiment are two ways of talking about consumer attitudes. Among economic reports, consumer sentiment refers to the Michigan survey while consumer confidence refers to The Conference Board's survey. Preliminary estimates for a month are released at mid-month. Final estimates for a month are released near the end of the month.



Description
The pattern in consumer attitudes and spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth. This balance was achieved through much of the nineties. For this reason alone, investors in the stock and bond markets enjoyed huge gains during the bull market of the 1990s. Consumer confidence did shift down in tandem with the equity market between 2000 and 2002 and then recovered in 2003 and 2004. More recently, the credit crunch and surge in gasoline prices led confidence downward in 2007. Despite a drop in gasoline prices, 2008 saw sentiment near record lows due to recession, a precipitous fall in stock prices, and fragile credit markets. However, consumer sentiment helped to confirm the easing of recession during 2009 as this index slowly rose from earlier lows. One should be aware that this report is released to private subscribers several minutes prior to release to the media. This may account for occasional market activity just prior to public release.

Consumer spending accounts for more than two-thirds of the economy, so the markets are always dying to know what consumers are up to and how they might behave in the near future. The more confident consumers are about the economy and their own personal finances, the more likely they are to spend. With this in mind, it's easy to see how this index of consumer attitudes gives insight to the direction of the economy. Just note that changes in consumer confidence and retail sales don't move in tandem month by month.