The preliminary University of Michigan consumer sentiment index is up 1.5 points to 63.5 in April after a final 62.0 in March. The reading is above the consensus of 62.7 in an Econoday survey. The increase reflects a 2.3 point rise in the index for current conditions to 68.6 in April and the 6-month expectations up 1.1 point to 60.3. Consumers continue to see a favorable jobs market in the short run, nonetheless, confidence remains low and consistent with an uncertain outlook. The best that can be said is that sentiment index readings are now returning to levels seen before inflation started to rise significantly in early 2022.

It is likely the recent rise in gasoline prices is largely behind a 1.0 percentage point increase in the 1-year inflation expectations measure to 4.6 percent in early April. The 5-year inflation expectations reading is unchanged at 2.9 percent where it has been since December 2022.

Consumer sentiment, which sank 5 full points in March to 62.0, is expected to recover only slightly, to 62.7 in the first reading for April.

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.

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.