The final University of Michigan Consumer Sentiment Index for September was revised up to 93.2 (previously 92.0) on higher readings for both present conditions (108.5, previously 106.9) and six month expectations (83.4, previously 82.4). Although it suggests that consumers are feeling a bit more inured to a negative news cycle, the level of the index is still the third lowest since 87.2 in October 2018. It is off the low of 89.8 in August when confidence took a hit on a number of fronts and the 91.2 in January when the partial federal government shutdown and lack of a resolution was making the economic outlook bleak.
Consumers are confident in the historical context, but have largely lost the giddiness seen in swathes of 2017 and 2018. The labor market is strong, gasoline prices are low, and mortgage rates are the best in about three years. Nonetheless, a sense of unease seems to be creeping in with greater worries about the health of the economy and signs that businesses are cutting back on hiring. The ugly rhetoric of the political scene as the presidential election campaigns ramp up is not helping. Impacts from the House’s decision to pursue articles of impeachment against President Trump won’t be seen until October.
The measures of inflation expectations remain about the same as they have been. The 1-year reading for September was unrevised at 2.8%, toward the high end of the recent range of about 2.5%-2.9% and certainly at a level the Fed will see as reasonably well anchored. The 5-year measure was revised up a tenth to 2.4% for September, a slightly firmer outlook for the medium term of inflation and off the lows of the recent range of about 2.3%-2.6%. This will give the Fed a little less to worry about in maintaining the credibility of the 2% symmetric inflation objective.
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