Consumer Sentiment Holding Gains

Consumer sentiment held on to the great bulk of its early May gain, coming in at 94.7 which is down 1.1 points from mid-month but up a very strong 5.7 points from April. May's final result is the best since June last year and is among the very strongest of the whole economic cycle.

The standout is the expectations component, up 7.3 points from April to 84.9 for the sharpest monthly gain since May 2013. Strength here ultimately reflects strength in the jobs outlook. The current conditions component also added to May's strength, up 3.2 points from April to 109.9. This is the best reading of the whole cycle, since January 2007, and is an unusually strong indication for current spending.

An unusual negative in the report, however, is the inflation outlook where 1-year expectations, despite the updraft underway in gasoline prices, is down another 1 tenth from mid-month to 2.4 percent for a major decline of 4 tenths from April. This is certain to fix the attention of FOMC policy makers and will be a major talking point against a June rate hike. Showing little change are 5-year expectations, down only 1 tenth from mid-month to 2.5 percent which is unchanged from April.

This report is mixed as far as rate expectations go but is a very positive indication for consumer spending which, unlike business spending, is showing resilience despite concerns over slowing economic growth and uncertainty during the political campaign.

Recent History Of This Indicator:
The consumer sentiment index shot higher in the mid-month May report, up nearly 7 points to 95.8 for the best reading since June last year. And forecasters expected the index to hold the gain, at a consensus 95.5. Strength for this index points to confidence in the jobs outlook.