Consumer Sentiment in U.S. Eases From Highest Since 2004

Consumer sentiment cooled from a 13-year high in November while remaining at levels that signal Americans will open their wallets for holiday purchases, a University of Michigan survey showed Wednesday.

Highlights of Michigan Sentiment (November, final)
Sentiment index fell to 98.5 (est. 98) from 100.7 in Oct.; preliminary reading was 97.8 Current conditions gauge, which measures Americans’ perceptions of their finances, fell to 113.5 from 116.5 Expectations measure decreased to 88.9 from 90.5

Key Takeaways

While the decline reflects an easing of confidence in both consumers’ current financial situation and their expectations, sentiment still matches the second-highest level since 2004. Respondents are voicing more certainty about the outlook for incomes, employment and inflation, according to the survey.
The data signal consumer spending will rise 2.7 percent in 2018, adjusted for inflation, as well as “the best runup to the holiday shopping season in a decade,” the report said. Unemployment has fallen to a 16-year low, property values have increased and stocks are at record highs.

While inflation expectations remain relatively low by historical standards, Federal Reserve policy makers may be heartened to learn from the report that survey respondents gave a relatively narrow range of responses -- “strong evidence that inflation expectations are firmly anchored and are held with the greatest degree of certainty in the history of these questions.”
Another measure of consumer sentiment eased from a 10-week high in the latest period, according to a separate report Wednesday. The Bloomberg Consumer Comfort Index fell to 51.7 from 52.1; it’s still close to a 16-year high.

Official’s Views

“Increased certainty about future income and job prospects has become a key factor that has supported discretionary purchases,” Richard Curtin, director of the University of Michigan consumer survey, said in a statement. “The data indicate that neither changes in fiscal nor monetary policies have yet had any noticeable impact on consumer expectations.”

Other Details

• Consumers saw inflation rate in the next year at 2.5 percent after 2.4 percent the prior month
• Inflation rate over next five to 10 years seen at 2.4 percent, lowest since May, after 2.5 percent in October
• Annual gain of 2.1 percent in household incomes expected in both October and November surveys, the best two-month average since 2008
• Index of buying conditions for durable goods unchanged from October, matching strongest since 2006