| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| Index | 65.0 | 58.9 to 69.0 | 66.4 | 64.9 |
Highlights
The preliminary University of Michigan consumer sentiment index for February is up to 66.4 after a final reading of 64.9 in January. The consensus in an Econoday survey is 65.0. The better than expected reading for February reflects an improvement in current conditions and fairly stable consumer expectations. Nonetheless, consumers remain pessimistic about the economy.
The index for current conditions is up to 72.6 in February after 68.4 in January. Although consumers faced some increases in prices for food and energy, the labor market offered some reassurance that the economy will continue to grow, although uncertainty is high.
The index of consumer expectations is little changed at 62.3 in February after 62.7 in January. This suggests that the risks to the outlook for households have not been alleviated despite ongoing strength in the labor market and continuing wage gains.
The 1-year inflation expectations measure is up three-tenths to 4.2 percent in February and is likely due to the rise in energy prices and some food items. However, the 5-year inflation expectations measure is unchanged at 2.9 percent where it has now been for three months in row. Outside of some short-term price volatility, consumers' inflation outlook is stable. This is a positive for the FOMC as it considers monetary policy and its credibility as an inflation fighter.
The index for current conditions is up to 72.6 in February after 68.4 in January. Although consumers faced some increases in prices for food and energy, the labor market offered some reassurance that the economy will continue to grow, although uncertainty is high.
The index of consumer expectations is little changed at 62.3 in February after 62.7 in January. This suggests that the risks to the outlook for households have not been alleviated despite ongoing strength in the labor market and continuing wage gains.
The 1-year inflation expectations measure is up three-tenths to 4.2 percent in February and is likely due to the rise in energy prices and some food items. However, the 5-year inflation expectations measure is unchanged at 2.9 percent where it has now been for three months in row. Outside of some short-term price volatility, consumers' inflation outlook is stable. This is a positive for the FOMC as it considers monetary policy and its credibility as an inflation fighter.
Market Consensus Before Announcement
Consumer sentiment is not expected to show much improvement, at a consensus 65.0 in the first reading for February versus 64.9 in January.
Definition
The University of Michigan's Consumer Survey Center questions households each month on their assessment of current conditions and expectations of future conditions. Preliminary estimates for a month are released at mid-month and are based on about 420 respondents. Final estimates are released near the end of the month and are based on about 600 respondents.
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 and, in large part because of this, investors in the stock and bond markets enjoyed huge gains. It was during the late nineties that the consumer sentiment index hit its historic peak, reaching levels that were never matched during the subsequent 2001 to 2007 expansion nor during the long expansion following the Great Recession.
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.
This balance was achieved through much of the nineties and, in large part because of this, investors in the stock and bond markets enjoyed huge gains. It was during the late nineties that the consumer sentiment index hit its historic peak, reaching levels that were never matched during the subsequent 2001 to 2007 expansion nor during the long expansion following the Great Recession.
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.
