Consumer resilience keeps confidence level favorable

by Francis Monfort03 Oct 2017
Consumer confidence remained favorable in September despite declining from August, according to new data from the University of Michigan.

The university’s Index of Consumer Sentiment was 95.1 in September, down 1.8% from 96.8 in August but up 4.3% from 91.2 in September 2016. A measure of current economic conditions rose 0.7% to 111.7 from 110.9 in August. The figure increased 7.2% from 104.2 in September 2016. The survey’s Index of Consumer Expectations was at 84.4, down 3.8% from August’s 87.7 and up 2.1% from 82.7 in the year-ago period.

Remaining largely unchanged from the mid-month level, September consumer sentiment demonstrates consumers’ resilience as fears over the economic impact of the recent hurricanes have quickly faded, according to Richard Curtin, chief economist of the survey. He said the declines recorded in the current financial situation of households were not surprising because the survey was able to reach Florida and Texas households in late September.

“In the past year, there has been a long list of issues that could have derailed the overall level of consumer confidence, including the unprecedented partisan divide, North Korea, Charlottesville, and the hurricanes. Confidence has nonetheless remained very favorable, moving sideward in a very narrow positive range,” Curtin said.

Additionally, he said that the sentiment index averaged 96.2 for the first nine months of the year, higher than the 91.9 and 92.9 averages recorded in the prior two years. Although the 2017 average is the highest since 2000, it is still well below the 105.3 average recorded from 1997 to 2000.

“Needless to say, resilience is an ineffable quality whose appearance or disappearance is difficult to predict in advance,” Curtin said. “While consumer resilience has lowered precautionary saving motives and increased willingness to spend and incur debt, those changes will still be constrained by slower income growth and consumers who are still more risk averse. Overall, consumer expenditures are expected to increase by 2.6% in 2017 and in the first half of 2018.”

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