Economy Watch: Consumers Still Fairly Optimistic

Favorable income gains and low inflation contributed to consumers expressing more optimism about the U.S. economy and their wage expectations in May, according to the University of Michigan's latest Consumer Sentiment Index.

Source: University of Michigan Survey of Consumers, May 2017
Source: University of Michigan Survey of Consumers, May 2017

Consumer sentiment remained high in early May, according to the University of Michigan on Friday. The early May figure for the school’s Consumer Sentiment Index, 97.7, was nearly identical with the December to May average of 97.4, and up 0.7 percent for the month and 3.2 percent for the year.

The “Trump bump”—at least as far as consumer sentiment is concerned—was relatively small, considering that the Sentiment Index averaged 91.8 in the comparable six-month period a year ago and 94.5 in the same period two years ago, according to the survey’s chief economist, Richard Curtin.

More favorable income gains and low inflation contributed to consumers expressing the most favorable real income expectations in a dozen years, which might mean better times for retail stores. Personal consumption expenditures are expected to advance about 2.3 percent in 2017.

But buying plans among the survey’s respondents were mixed: consumers were keen to buy household durables, but less so about buying cars. Home buying conditions were viewed less favorably, but were offset by the most favorable views about home selling in more than a decade, Curtin said.