Consumer Sentiment: Final Result for December 2017

The University of Michigan's Index of Consumer Sentiment (ICS) - Final Result for December 2017 was released today:

Predicted: 97.0
Actual: 95.9

• Change from Last Month: -2.64%

• Change from 12 Months Ago: -2.342%

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From today's report:

"...Consumer confidence continued to slowly sink in December, with most of the decline among lower income households. The extent of the decline was minor, with the December figure just below the average for 2017 (95.9 versus 96.8). Indeed, the average in 2017 was the highest since 2000, and only during the long expansions of the 1960's and 1990's was confidence significantly higher. The recent strength was due to the second highest assessments of current economic conditions since 2000. This strength was offset by a slight increase in uncertainty about future economic prospects.

Tax reform was spontaneously mentioned by 29% of all respondents, with nearly an equal split between positive and negative impacts on economic prospects. Party affiliation was the dominant correlate of people's assessments of the tax legislation, with the long term economic outlook the most negatively affected.

Buying plans for durables and vehicles remained unchanged at favorable levels. Most consumers will know more about the revised tax code when the new paycheck withholding amounts take effect in early 2018. While the mostly small gains in take-home pay may not spark an uptick in optimism, those gains would act to dampen any renewed pessimism. Overall, the data indicate that real personal consumption expenditures will expand by 2.6% in 2018..."

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The ICS is derived from the following five survey questions:

1. "We are interested in how people are getting along financially these days. Would you say that you (and your family living there) are better off or worse off financially than you were a year ago?"
   
   
   
2. "Now looking ahead, do you think that a year from now you (and your family living there) will be better off financially, or worse off, or just about the same as now?"
   
   
   
3. "Now turning to business conditions in the country as a whole, do you think that during the next twelve months we'll have good times financially, or bad times, or what?"
   
   
   
4. "Looking ahead, which would you say is more likely: that in the country as a whole we'll have continuous good times during the next five years or so, or that we will have periods of widespread unemployment or depression, or what?"
   
   
   
5. "About the big things people buy for their homes, such as furniture, a refrigerator, stove, television, and things like that. Generally speaking, do you think now is a good or bad time for people to buy major household items?"
   
   

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• Click here for more on how the ICS is calculated.

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The ICS uses a 1966 baseline, i.e. for 1966, the ICS = 100. So any number that is below the 1966 baseline of 100 means that the folks who were polled recently aren't as optimistic about the U.S. economy as the sample that was polled back in 1966.

The ICS is similar to the Consumer Confidence Index in that they both measure consumer attitudes and offer valuable insight into consumer spending.

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The "predicted" figure is what economists were expecting, while the "actual" is the true or real figure.

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Last month's final ICS reading was 98.5.

• Click here to view the full University of Michigan report.

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