Michigan Consumer Sentiment: December Final Highest Since July

wall-street-etfJill Mislinski: The University of Michigan Final Consumer Sentiment for December came in at 92.6, a 0.8 point increase from the 91.8 December Preliminary reading. Investing.com had forecast an even 92.0.

Surveys of Consumers chief economist, Richard Curtin makes the following comments:

Consumer confidence rose to its highest level since July, with the December reading nearly equal to the 2015 average of 92.9–which was the highest since 2004. Importantly, all of the improvement was in how consumers evaluated current economic conditions. The December gain was largely due to lower inflation, which bolstered real incomes and brightened buying plans for household durables. Indeed, there have been only three surveys in more than the past half century in which a higher proportion mentioned the availability of price discounts for durables. Overall, the data point toward gains of 2.8% in real personal consumption expenditures during 2016. [More…]

See the chart below for a long-term perspective on this widely watched indicator. Recessions and real GDP are included to help us evaluate the correlation between the Michigan Consumer Sentiment Index and the broader economy.

Michigan Consumer Sentiment

To put today’s report into the larger historical context since its beginning in 1978, consumer sentiment is 8.5 percent above the average reading (arithmetic mean) and 9.8 percent above the geometric mean. The current index level is at the 67th percentile of the 456 monthly data points in this series.

The Michigan average since its inception is 85.3. During non-recessionary years the average is 87.5. The average during the five recessions is 69.3. So the latest sentiment number puts us 22.3 points above the average recession mindset and 5.1 points above the non-recession average.

Note that this indicator is somewhat volatile, with a 3.1 point absolute average monthly change. The latest data point was a 1.3 point change from the previous month. For a visual sense of the volatility, here is a chart with the monthly data and a three-month moving average.

3-Month Moving Average

For the sake of comparison, here is a chart of the Conference Board’s Consumer Confidence Index (monthly update here).

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