Research >> Economics
University of Michigan Consumer Confidence unchanged at 82.7
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Consumer confidence remained largely unchanged from last month at its highest level in five years. When asked to identify any recent economic news, consumers more frequently made unfavorable references to potential changes in future federal tax and spending pro-grams as well as the inability of the political parties to reach a timely settlement. There have only been five other surveys during the past half century in which more consumers spontaneously mentioned their uncertainty about government policies. Interestingly, the past occurrences were also related to taxes, spending, and the federal deficit: Clinton’s deficit reduction program in 1993 and last summers debt ceiling debate which prompted a drop in the Sentiment Index to 55.8, the fourth lowest level recorded in the long history of the surveys. While consumers remain optimistic, that optimism is contingent on the promise of no higher taxes, except on the wealthy.
Personal Finances Improve
More households reported gains in their personal finances in the November survey than any other time since March of 2008. Although a slightly larger number reported worsening finances, this represents a large gain from a year ago when worsening finances were reported twice as frequently as an improving financial situation.
Employment Gains Expected
Anticipated gains in the economy meant that consumers held much more favorable job expectations. The survey recorded the most favorable outlook for the unemployment rate since 1984. Nearly one-in-three consumers expected a lower unemployment rate during the year ahead in both the October and November 2012 surveys.
The Consumer Sentiment Index was 82.7 in November 2012, just above 82.6 in October, and well above last November’s 63.7. The Expectations Index and Current Conditions components moved in opposite directions. The Expectations Index slipped to 77.6 in November from 79.0 in October, while the Current Conditions Index rose to 90.7 in November from 88.1 in October. Both components were well above last November, with the Expectations Index posting more than twice the gain of the Current Conditions Index.
The gains in confidence ended in late November as consumers became more uncertain about when and how the fiscal cliff with be bridged. While they had anticipated a last minute settlement, some consum-ers are beginning to doubt whether that will hap-pen before higher tax rates take effect in January. While a resolution just before year-end could re-verse any future spending declines, it would none-theless diminish holiday spending. Moreover, consumers do not make a distinction between fed-eral income and payroll taxes, so any settlement that excludes an extension of the payroll tax cut could reduce optimism starting in early January.
Posted: November 21, 2012 Wednesday 10:00 AM