Friday, January 13, 2017

Preliminary January Consumer Sentiment at 98.1

by Bill McBride on 1/13/2017 10:13:00 AM

The preliminary University of Michigan consumer sentiment index for January was at 98.1, down slightly from 98.2 in December.

Consumer confidence remained unchanged at the cyclical peak levels recorded in December. The Current Conditions Index rose 0.6 points to reach its highest level since 2004, and the Expectations Index fell 0.6 points which was lower than only the 2015 peak during the past dozen years. The post-election surge in optimism was accompanied by an unprecedented degree of both positive and negative concerns about the incoming administration spontaneously mentioned when asked about economic news. The importance of government policies and partisanship has sharply risen over the past half century. From 1960 to 2000, the combined average of positive and negative references to government policies was just 6%; during the past six years, this proportion averaged 20%, and rose to new peaks in early January, with positive and negative references totaling 44%. This extraordinary level of partisanship has had a dramatic impact on economic expectations. In early January, the partisan divide on the Expectations Index was a stunning 42.7 points (108.9 among those who favorably mentioned government policies, and 66.2 among those who made unfavorable references). Needless to say, these extreme differences would imply either strong growth or a recession. Since neither is likely, one would anticipate that both extreme views will be tempered in the months ahead.
emphasis added
Consumer Sentiment
Click on graph for larger image.

Consumer sentiment is a concurrent indicator (not a leading indicator). The survey shows some people are now much more positive than prior to the U.S. election - and others are much more negative.