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Economy

Economic Data (USA)

Friday, May 25, 2018

Consumer Sentiment: Final Result for May 2018

The University of Michigan's Index of Consumer Sentiment (ICS) - Final Result for May 2018 was released today:

Predicted: 99.0
Actual: 98.0

  • Change from Previous Month: -0.8097% (-0.8 point)
  • Change from 12 Months Previous: +0.9269% (+0.9 point)

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Previous Month's Final ICS Reading: 98.8.

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From today's report:


"...Consumer sentiment slipped by less than an Index-point from last month. Since Trump's election, the Sentiment Index has meandered in a tight eight-point range from 93.4 to 101.4, with the small month-to-month variations indicating no emerging trend. Consumers have remained focused on expected gains in jobs and incomes as well as anticipated increases in interest rates and inflation during the year ahead. As past expansions have shown, rising interest rates do not suppress spending gains as long as they are accompanied by more substantial increases in incomes. The May survey, however, found that consumers anticipated smaller income gains than a month or year ago, even though they anticipate the unemployment rate to stabilize at its current eighteen year low. Importantly, references to discounted prices for durables, vehicles, and homes fell to decade lows. Coupled with higher interest rates, it is likely that the pace of growth in personal consumption will remain at about 2.6% during the year ahead.

When asked to explain how their personal finances had changed, the proportion that spontaneously cited higher prices worsening their financial situation has shown a close correspondence with actual trends in the year-over-year change in the CPI-see the chart. That close relationship ended about a decade ago, and in the past year or so, as the CPI has risen, complaints about inflation have fallen. While the reasons underlying the current divergence are unclear, it nonetheless signals a change in how consumers judge the impact of inflation on their personal finances. It may also suggest a change in their behavioral reaction to inflation..."

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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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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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