Consumer Sentiment Nearly Recovers from Mid-Month Dive in February

Ann Arbor, MI, February 29, 2016—Consumer sentiment fell 0.3% in February to 91.7, according to the final results from the University of Michigan Survey of Consumers.

This represents a 3.9% drop year over year.

However, the final figure is a significant improvement from the mid-month figure of 90.7.

“Consumer confidence nearly recovered the entire small loss it recorded at mid month, with the Sentiment Index finishing February just 0.3 Index-points below January,” says Richard Curtin, Survey of Consumers chief economist. “Although consumers are not as optimistic as at the start of last year, the Sentiment Index is just 6.5% below the cyclical peak of 98.1 set in January 2015. Such a small decline is hardly consistent with the onset of a downturn in consumer spending. By way of contrast, in January 2007, the Sentiment Index reached a cyclical peak of 96.9 and then declined by 27% to 70.8 in the February 2008 survey. At that time, the sharp drop came with the early warning that ‘declines of this magnitude have always been associated with subsequent recessions.’ Needless to say, the current decline of just 6.5% hardly merits a recession warning, although it does indicate a somewhat slower expansion in consumer expenditures-to 2.7% in 2016, down from 3.1% in 2015. Most of the decline from last year’s peak has been in how consumers view year-ahead prospects for the economy, while the outlook for their personal financial situation has improved to its best level in ten years. Rather modest wage gains as well as very low inflation have meant that consumers expect increases in their real incomes during the year ahead. Consumers’ most important concern involves how much the slowdown in GDP growth will affect employment growth. At present, consumers anticipate only a slight negative impact on jobs.”