Consumer sentiment, while down from the jump at the beginning of August, increased from July despite recent national events, according to the Survey of Consumers conducted by the University of Michigan.
The Index of Consumer Sentiment increased to 96.8 in August, down from the jump to 97.6 at the beginning of the month. This is up 3.6% from 93.4 in July, and up 7.8% from 89.8 in August 2016.
“Consumer confidence has remained at a very favorable level, although slipping somewhat from mid-month,” Survey of Consumers Chief Economist Richard Curtin said. “The Sentiment Index has been higher during the first eight months of 2017 than in any year since 2000, which was the peak year of the longest expansion in U.S. history.”
An article by Jill Mislinski for Advisor Perspectives explains what this means historically:
The Michigan average since its inception is 85.4. During non-recessionary years the average is 87.6. The average during the five recessions is 69.3.
Earlier this month, the survey’s chief economists predicted American’s outlook could diminish by the end of August due to recent national events. However, the newly-released survey report shows this is not the case, but that Hurricane Harvey could still change consumers’ view of the economy.
“When asked about news of recent developments, surprisingly few consumers made any reference to Charlottesville, North Korea, or Harvey-although too few interviews were conducted to fully assess the storm's ultimate impact,” Curtin said. “Harvey may diminish the third quarter pace of economic growth, and higher gas prices will directly impact consumers.”
“Prior to the storm, consumers anticipated no increase in gas prices in the year ahead, an expected change of just 0.4 cents,” he said. “Given the current resilience of consumers, temporary increases in gas prices as well as a brief period of weakness in economic growth and employment are unlikely to derail confidence. Nonetheless, all of these events are more likely to increase precautionary motives and to slightly temper spending trends.”
The Current Economic Condition section of the index decreased slightly from last month, falling 2.2% to 110.9, down from 113.4 in July. However, this is still up 3.6% from 107 last year.
The Index of Consumer Expectations saw the highest increase, rising 8.9% from last month’s 80.5 and 11.4% from last year’s 78.7 to 87.7 in August.
“The renewed strength in 2017 was mainly due to consumers' favorable assessments of their own financial situations,” Curtin said. “Lows in unemployment, inflation, and interest rates, as well as renewed gains in the value of their homes and stock portfolios, pushed personal financial evaluations to near all-time peaks.”
