Consumer sentiment remained at the same favorable levels in the December survey as it has recorded throughout the year, according to the latest University of Michigan Surveys of Consumers.

The Sentiment Index averaged 98.4 in 2018, the best year since 107.6 in 2000. Over the past half century, the Sentiment Index was higher in only two other time periods: 1964-65 and 1997-2000. These periods correspond to the two longest prior expansions since the mid-1800s.

If the current expansion lasts past mid-2019, as is likely based on current data, it will be-

come the longest expansion ever recorded for the U.S. economy, said U-M economist Richard Curtin, director of the surveys. The data indicate that growth in real personal consumption expenditures can be expected to moderate in 2019 but still grow at a positive rate of 2.6 percent.

“The plunge in stock prices has garnered news headlines in the past week. Consumers, however, have paid more attention to news reports about income and job prospects,” Curtin said. “Even in the last week of the survey, falling stock prices were reported by just 12 percent as a primary concern about recent economic developments. This may reflect their initial dismissal as another indication of heightened volatility of stock prices, and not as a signal of an emerging downtrend.

“While next month’s data may reflect increased concerns, it has been news of changing job prospects that have been of greatest concern to consumers, with the December survey recording the first break from positive news in two years.”

Job Prospects Weaken Slightly
Consumers reported more negative than positive news about job prospects for the first time in two years, with the shift widespread across socioeconomic subgroups. When asked about prospects for the national unemployment rate, 30 percent expected increases, up from last month’s 22 percent and the highest percentage in two years.

Importantly, this still meant that 70 percent anticipated no increase in unemployment during the year ahead, Curtin said.

Current Finances Remain Strong
The December survey found 54 percent of all consumers reported that their finances had improved, just above the half-century record of 53 percent for the entire year of 2018. Higher incomes were mentioned by 41 percent in December, just below the 2018 average of 42 percent. When asked about income increases expected for 2019, a gain of 2.4 percent was anticipated, just below last month’s 2.5 percent, and the most favorable two-month average since 2007.

Buying Plans Unchanged
Home- and vehicle-buying attitudes were unchanged at the same diminished levels found in the 4th quarter due to less favorable views of prices and interest rates. In contrast, small household durable buying plans improved.

Consumer Sentiment Index
The Consumer Sentiment Index was 98.3 in the December 2018, above last month’s 97.5 and last December’s 95.9. The renewed strength was due to gains in Current Economic Conditions, which rose to 116.1 from last month’s 112.3 and last year’s 113.8. The Expectations Index fell to 87.0, between last month’s 88.1 and last year’s 84.3.

Consumer confidence remained in December at the same record favorable levels as it has throughout the year. The Sentiment Index averaged 98.4 in 2018, the best year since 107.6 in 2000 (see the chart). Over the past half century, sentiment was higher in only two other time periods: 1964-65 and 1997-2000. These periods correspond to the two longest prior expansions since the mid 1800's. If the current expansion lasts past mid-2019, as is likely based on current data, it will become the longest expansion ever recorded.

While the plunge in stock prices has recently garnered the most attention in the national press, consumers have focused more on their concerns about income and job prospects. Consumers reported more negative than positive news about job prospects for the first time in two years, with the shift widespread across socioeconomic subgroups. When asked about prospects for the national unemployment rate, 30% expected increases, up from last month's 22% and the highest percentage in two years. Importantly, this still meant that 70% anticipated no increase in unemployment in the year ahead. Surprisingly, even in the last week of the survey, falling stock prices were reported by just 12% as a primary concern about recent economic developments. This may reflect their initial dismissal as another indication of the heightened volatility of stock prices, and not signal an emerging downtrend. While next month's data may reflect increased concerns, it has been news of changing job and income prospects that have been of the greatest concern to consumers.