The University of Michigan’s Index of Consumer Sentiment is one of two monthly US consumer sentiment indices, the other being the Conference Board’s Consumer Confidence Survey. It covers personal finances, business conditions and buying conditions. As private consumption accounts for a majority of GDP growth in advanced economies, consumer sentiment surveys present a picture of the economy well in advance of official reports. However, as leading indicators, they are only as useful as other widely available data.
The latest survey conducted by the university indicates US consumers, especially those with incomes in the lowest segment, have become more sensitive to price rises of consumer goods. The economist in charge of the survey, Richard Curtin, described recent changes in consumers’ views as “extraordinary shifts in price perceptions” which indicated little tolerance for price rises above a fairly low rate.
The result was a fall in the index from July’s revised reading of 97.9 to 95.3 in August, which is about the same reading as at the start of 2018. This reading is still in the range which could be considered as elevated and it is considerably more optimistic than the long-term average (see chart above).