Consumer Sentiment Relatively Stable In June

The University of Michigan’s (U-M) Surveys of Consumers reports that despite declines in June, consumer sentiment remains at high levels. The Surveys of Consumers’ Consumer Sentiment Index was 93.5 in the June 2016 survey, below the 94.7 mark set in May, and last June’s 96.1. Its 1.3-percent decline from May is attributed to rising concerns about the economy.

While no recession is anticipated, U-M’s survey found that consumers increasingly expect a slower pace of growth in the year ahead. However, strength in personal finances will keep consumer spending at relatively high levels and support an uninterrupted economic expansion. Although the data are consistent with GDP growth falling slightly below 2.0 percent in 2016, U-M expects real consumer spending to rise by 2.5 percent in 2016 and 2.7 percent in 2017.

“Consumer sentiment has remained at high levels and has shown only minor month-to-month variations in the past 18 months,” says Surveys of Consumers Chief Economist Richard Curtin. “This relative stability stands in sharp contrast to the much more volatile path of GDP. Most of the persistent strength can be traced to more favorable personal finances, despite rather small income gains. Overall, these favorable assessments represent an accommodation for financial planning purposes, but not an acceptance of the inevitability of such a lackluster outcome. Indeed, when asked to evaluate current economic policies, nearly twice as many consumers in June judged economic policies as poor rather than rating them favorably.”

Consumers are upbeat about their personal finances, with the survey finding the most positive assessments of their finances since late 2000. It attributes the positivity to near record references to income increases and the fewest complaints about inflation. Recently improved finances were cited by 49 percent in June, unchanged from May, and the highest level in the last decade. Furthermore, expected gains in inflation-adjusted incomes reached their highest level since January 2007 despite the fact that consumers anticipated nominal income gains of just 1.6 percent in June.

filed under industry-news | july-2016
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