Michigan Consumer Sentiment: Lowest Since September 2014

September 11, 2015 by

Wall streetJill Mislinski: The University of Michigan Preliminary Consumer Sentiment for September came in at 85.7, a decrease from the 91.9 Final August reading. Investing.com had forecast 91.2 for the September Preliminary. This 6.2 point decline is the largest since September 2013 and the current preliminary sentiment is at its lowest level since September of 2014.

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

The decline in optimism narrowed in early September from late August as consumers grew somewhat more confident that the underlying strength in the domestic economy would insure a continued expansion. The twin strengths of higher employment and lower prices softened the impact from the losses in household wealth. To be sure, consumers still anticipate a weaker domestic economy due to the global slowdown and are less optimistic about future growth in jobs and wages than they were a few months ago. While the current strength in consumer spending is still likely to persist in the year ahead, the more lasting impact of recent events may be a heightened attentiveness by consumers to potential negative developments. Without this recent shift in focus, consumers would have been more likely to view the Fed’s interest rate hike as confirming their prevailing optimism, but with the shift, it could be taken as a signal for a slower pace of future economic growth. [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 now 0.5 percent above the average reading (arithmetic mean) and 2 percent above the geometric mean. The current index level is at the 45th percentile of the 453 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 16.4 points above the average recession mindset and 1.8 points below 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 6.2 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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