Consumer sentiment accelerated noticeably late this month, based at least on the separation between the index's mid-month showing at 76.5 and final showing at 79.4. Splitting the difference implies a second-half reading in the mid-to-low 80s which would be the first 80s showing since June 2021. As is, the 79.4 is the best since July 2021.

Part of the gain is tied to easing inflationary pressures, evident in both the 1-year and 5-year expectations which both edged 1 tenth lower in the month to 2.8 and 2.9 percent respectively. The 5-year rate never really has shown much pressure during the inflation surge (indicating that long-term inflation expectations have remained firmly anchored all along) while the 1-year rate has been coming down from a mid-5 percent peak in mid-2022.

Turning back to the index, both components improved in March especially current conditions up 3.1 points to 82.5 with expectations gaining 2.2 points to 77.4. The gain in current conditions will help boost forecasts for March retail spending.

Consumer sentiment in final March is expected to hold unchanged from the preliminary 76.5 that was down slightly from February's 76.9. Year-ahead inflation expectations for final March are also seen unchanged at the steady 3.0 percent level.

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.