Consumer Sentiment On The Rise

Consumer sentiment is on the rise this month, climbing to 84.6 vs a final August reading of 82.5 and a mid-month August reading of 79.2. The gain, however, is centered in the expectations component, not the current conditions component which slipped to 98.5 vs 99.8 in final August and 99.6 in mid-month August. The dip in current conditions doesn't point to rising consumer activity for September.

But the gain in expectations, to 75.6 vs 71.3 in final August and well up from 66.2 in mid-month August, does point to long-term confidence in the jobs and income outlooks. This gain may be tied in part to lower gasoline prices and lack of concern over inflationary pressures. One-year inflation expectations are definitely coming down, to 3.0 percent vs 3.2 percent in final August and 3.4 percent at mid-month August. Five-year expectations are at 2.8 percent, down 1 tenth from final August and unchanged from mid-month August.

This report would have more bearing on the immediate outlook if it weren't for the softness in current conditions. Still, taken as a whole and together with this morning's strong retail sales report, the consumer sector looks to be on the rise and an increasing part of economic growth. Markets are showing no significant initial reaction to today's report.