Consumer Sentiment Closes February Up 1.7%

Ann Arbor, MI, March 29, 2018-Consumer sentiment rose 1.7% to 101.4 in March, from February’s 99.7 rate, according to results from the University of Michigan’s Survey of Consumers.

This represents a 4.6% change year over year.

“Consumer sentiment at month's end was marginally below the mid-month reading due to uncertainty about the impact of the proposed trade tariffs,” says Survey of Consumers chief economist Richard Curtin. “The Sentiment Index, however, still reached the highest level since 2004, and the Current Conditions Index set a new all-time peak. Importantly, all of the March gain in the Sentiment Index was among households with incomes in the bottom third (+14.1); those in the middle third were unchanged, while the Index fell among households in the top third (-5.6). Households with incomes in the top third cited significantly greater concerns with government economic policies than last month, especially trade policies, with net references falling from +31 to just +1, offsetting their positive reactions to tax policies. The consensus expectation among consumers is that interest rates will increase in the foreseeable future. While consumers view the current level of interest rates as still relatively low, they understand that interest rate hikes are intended to dampen the future pace of economic growth. Their reaction will both emphasize borrowing-in-advance of those expected increases as well as heighten their precautionary savings motives. The trade-off between spending and saving will crucially depend on the pace of future interest rate hikes compared with the pace of income growth. It is likely that income growth will initially dominate, tilting consumers' motives more toward spending than saving. Overall, the data are consistent with a growth rate of 2.6% in consumption from mid-2018 to mid-2019.”