Consumer Sentiment Fell 2.2% in February, Still Up 5.0% YOY

Ann Arbor, MI, February 24, 2017—Consumer sentiment closed February down 2.2% at 96.3 from January’s rate of 98.5, according to the University of Michigan Survey of Consumers.

This still represents a 5.0% increase over February 2016’s rate of 91.7.

“While consumer confidence edged upward in late February, it remained slightly below the decade peak recorded in January,” says Survey of Consumers chief economist Richard Curtin. “Overall, the Sentiment Index has been higher during the past three months than anytime since March 2004. Normally, the implication would be that consumers expected Trump's election to have a positive economic impact. That is not the case since the gain represents the result of an unprecedented partisan divergence, with Democrats expecting recession and Republicans expecting robust growth. Indeed, the difference between these two parties is nearly identical to the difference between the all-time peak and trough values in the Expectations Index - 64.6 versus 64.4. While the expectations of Democrats and Republicans largely offset each other, the overall gain in the Expectations Index was due to self-identified Independents, who were much closer to the optimism of the Republicans than the pessimism of the Democrats. (Note: the February Expectations Index was 55.5 among Democrats, 120.1 among Republicans, and 89.2 among Independents.) Since neither recession nor robust growth is expected in 2017, both extremes must eventually converge. Although the data indicate a growth rate of 2.7% in consumption during 2017, the data also indicate we can expect greater volatility and discretionary spending differences across subgroups.”