Economy Watch: Consumer Sentiment Hits 14-Year High

Despite some uncertainty about the impact of proposed trade tariffs, U.S. consumers were more optimistic in March, according to the University of Michigan's latest report.
Source: University of Michigan Surveys of Consumers, March 2018

Consumer sentiment continues to be strong, according to the University of Michigan latest Surveys of Consumers, ending March 101.4, a bit below the mid-month reading but up from 99.7 in February and 95.7 at the end of January. According to the report, the recent drop in income taxes spurred some of the optimism in February and March, reflecting a small bump up in take-home pay, but the slight dip at the end of March was likely due to uncertainty surrounding the newly proposed trade tariffs.

The Sentiment Index, however, reached its highest level since 2004, and the Current Conditions Index set a new all-time peak.

Current conditions were up to 121.2, the university said, which hints at an improvement in consumer spending —something retailers might be glad about, unless the lion’s share of any increase goes to online purchases. The Expectations index dipped a bit in March to 88.0.

Concurrently with increased consumer sentiment was an increase in personal income for February, as reported by the Bureau of Economic Analysis, and which might bode well for retail spending. Personal income was up 0.4 percent for the month, and so was disposable personal income.

On the other hand, real disposable personal income was up only 0.2 percent, considering the slow but steady rate of inflation, which the bureau put at 0.2 percent for the month. Personal consumption expenditures were likewise up 0.2 percent for the month, the BEA reported.