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 still think employment and pay prospects look favourable, with trade disputes a concern for an increasing number of respondents. The net result was a bounce in the index from 96.2 in August to 100.8 in September, which is well above the long-term average (see chart below).
The chief economist of the Survey of Consumers unit, Richard Curtin, said households expect employment opportunities to be plentiful in the year ahead. However, almost as many people expect an economic downturn somewhere in the medium term as those which did not. “While consumers were somewhat more likely to anticipate that the economic expansion would continue uninterrupted over the next five years, nearly as many expect another downturn sometime in the next five years. The largest problem cited on the economic horizon involved the anticipated negative impact from tariffs.”