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University of Michigan Consumer Confidence slipped in June to 95.1
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Consumer confidence slipped to its lowest level since Trump was elected, although the overall level still remains quite favorable. The average level of the Sentiment Index during the first half of 2017 was 96.8, the best half-year average since the second half of 2000, and the partisan gap between Democrats and Republicans stood at 39 Index-points in June, nearly identical to the 38 point gap in February. The partisan divide still meant that June’s Sentiment Index of 95.1 was nearly equal to both the average (95.7) between the optimism of Republicans and the pessimism of Democrats and the value for Independents (94.6). Even with a much improved 2nd quarter, personal consumption spending is expected to advance during 2017 by about 2.3%.
Personal Finances Reach Decade Peak
The highest number of consumers reported an improved financial situation in June than anytime since November of 2000. The financial strength was due to gains in incomes as well as gains in household wealth driven by rising stock prices and home values. Just one-in-ten households in the June 2017 survey expected their household finances to worsen in the year ahead. Overall, personal finances were brighter than anytime in the last decade.
Partisan Economic Outlook
Selective perception of economic news still dominates as 80% of Democrats reported unfavorable developments, while 87% of Republicans reported favorable developments. Democrats reported negative references to government economic policies at about the same rate as last month, but Republicans voiced half as many positive references as they did in the prior month. Overall, for the first time since Trump was elected, more consumers expected a downturn sometime in the next five years than expected an uninterrupted expansion.
Consumer Sentiment Index
The Consumer Sentiment Index was 95.1 in June 2017, between the 97.1 in May and the 93.5 in last June’s survey. The Current Conditions Index was 112.5 in June, just above May’s 111.7 and last June’s 110.8. The Expectations Index declined to 83.9 in June from 87.7 in May but was above last June’s 82.4. The Expectations Index fell to its lowest value since just prior to Trump’s election.
The most important policies to consumers are those that directly or indirectly affect their jobs, incomes, and their financial security. Fortunately, the heightened concerns consumers now express about future prospects for the economy have thus far been offset by the renewed strength in their personal financial situation. The combination of continuing improvements in personal finances and increasing concerns about the economic outlook is typical around cyclical peaks. Nonetheless, the data provide no indication of an imminent downturn nor do the data provide any indication of a resurgent boom in spending.
Posted: June 30, 2017 Friday 09:45 AM