Consumer Sentiment Rose 1.3% in Early May

Ann Arbor, MI, June 15, 2018-Consumer sentiment rose 1.3% to 99.3 in early June from May’s 98.0 rate, according to the University of Michigan Survey of Consumers.

This represents a 4.5% increase year over year.

“Consumer sentiment rose slightly in early June due to consumers' more favorable assessments of their current financial situation and more favorable views of current buying conditions for household durables,” says Survey of Consumers chief economist, Richard Curtin. “The Expectations Index, in contrast, declined to its lowest level since the start of the year due to less favorable prospects for the overall economy. The sharpest divide was between the record number of households who mentioned recent income gains and the highest expected year-ahead inflation rate since 2015. At some point in every economic expansion, favorable income and job prospects act to offset higher inflation and interest rate expectations. Only when inflation and interest rates are expected to persistently exceed income and job prospects will consumers begin to curtail their discretionary spending. Indeed, greater certainty about future income and job prospects have become the main drivers of more favorable purchase plans. The importance of favorable job prospects for discretionary spending on durables is highlighted in the chart, which shows the correspondence between consumers' unemployment expectations and the annual per capita change in expenditures on durable goods from BEA accounts. The unemployment rate during the year ahead was more often expected to decline than increase (29% versus 23%), with most (48%) expecting it to remain unchanged at its current low, which should modestly accelerate purchases. Moreover, the continued small declines that are now anticipated in the unemployment rate, as well as more robust gains in household income, will bolster real personal consumption expenditures during the year ahead.”