The preliminary University of Michigan consumer sentiment index is at 76.5 for March, little changed from the final 76.9 in February. It is below the consensus of 77.3 in the Econoday survey of forecasters. Although consumer sentiment has ebbed a bit from the near-term peak of 79.0 in January which was the highest since 81.2 in July 2021, it remains substantially better than the record low of 50.0 in June 2022.

Overall, consumers are less worried about a recession and/or a severe weakening in the labor market, and are more confident that inflation is getting under control. Concerns about the geopolitical situation at home and abroad are keeping optimism in check.

The current conditions index is unchanged at 79.4 in March from February, supported by a tight labor market and ongoing opportunities for increased compensation. The six-month expectations index is down to 74.6 in March after 75.2 in February. It accounts for all of the slip in consumer sentiment.

The 1-year inflation expectations measure is unchanged at 3.0 percent and virtually unchanged for the past four months despite some fluctuations in food and gasoline prices. The 5-year inflation expectations measure is 2.9 percent in March, the same as in the prior three months. Inflation expectations for the near- and medium-term have converged in the past few months and suggest that consumers do not anticipate much change in upward price pressures overall.

After ratcheting to multi-year highs in January and February, consumer sentiment in the first indication for March is expected to rise a further but modest 4 tenths to 77.3. Steady year-ahead inflation expectations are the consensus, no change at 3.0 percent.

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.