| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| Index | 70.8 | 68.6 to 73.5 | 73.0 | 70.5 |
| Year-ahead Inflation Expectations | 2.6% | 2.7% |
Highlights
The preliminary University of Michigan consumer sentiment index for November is up 2.5 points to 73.0 after 70.5 in October and is the highest since 77.2 in April. The November index is well above the consensus of 70.8 in the Econoday survey of forecasters.
While the index for current conditions is down 0.5 point to 64.4 in November from 64.9 in October, the expectations index is up 4.4 points to 78.5 in November after 74.1 in October and the highest since 79.0 in July 2021. This suggests that consumers' perceptions of current conditions remain relatively soft and stifled in the contentious election season. However, the outlook for the near future is more buoyant in the aftermath of the election.
It should be noted that this preliminary survey will not capture the election outcome. As such, the final report could see more revision than usual.
The 1-year inflation expectations measure dips a tenth to 2.6 percent in early November, the lowest since 2.5 percent in December 2020. Moderation in energy prices likely helped bring the reading down a bit. The 5-year inflation expectations measure is up a tenth to 3.1 percent in November. The reading has hovered around the 3 percent-mark for most of the last two years. Consumer inflation expectations for the medium term remain well-anchored but also above the Fed's 2 percent inflation objective.
While the index for current conditions is down 0.5 point to 64.4 in November from 64.9 in October, the expectations index is up 4.4 points to 78.5 in November after 74.1 in October and the highest since 79.0 in July 2021. This suggests that consumers' perceptions of current conditions remain relatively soft and stifled in the contentious election season. However, the outlook for the near future is more buoyant in the aftermath of the election.
It should be noted that this preliminary survey will not capture the election outcome. As such, the final report could see more revision than usual.
The 1-year inflation expectations measure dips a tenth to 2.6 percent in early November, the lowest since 2.5 percent in December 2020. Moderation in energy prices likely helped bring the reading down a bit. The 5-year inflation expectations measure is up a tenth to 3.1 percent in November. The reading has hovered around the 3 percent-mark for most of the last two years. Consumer inflation expectations for the medium term remain well-anchored but also above the Fed's 2 percent inflation objective.
Market Consensus Before Announcement
The preliminary consumer sentiment reading for November is expected to continue edging up after rising for three straight months. The consensus looks for 70.8, up from 70.5 in October.
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.
