US consumers are becoming more confident by the day, apparently, even as it will likely be quite a while before the pandemic completely fades from the memories of those lucky enough to have survived it.
University of Michigan sentiment hit the highest in a year in the final print for March. 84.9 on the headline gauge represented an uptick from the initial 83 reading, and a sizable advance from February’s 76.8.
Unsurprisingly, free money and a scientific solution to a biological problem helped explain relative consumer optimism. “Consumer sentiment continued to rise in late March, reaching its highest level in a year due to the third disbursement of relief checks and better than anticipated vaccination progress,” the survey’s chief economist, Richard Curtin, said.
While consumers are more optimistic, they’re also restless. A third suggested cabin fever is getting annoying, to speak colloquially. “As prospects for obtaining vaccination have grown, so too has people’s impatience with isolation,” Curtin remarked.
A majority have heard about economic gains and an improving labor market. “The data clearly point toward robust increases in consumer spending,” the survey said.
March marked the first time during the pandemic era that consumers expect “good rather than bad times in the national economy during the year ahead.” The breakdown on that was 49% versus 41%. If you’re wondering what impact stimulus and the February jobs report may have had on those expectations, note that the comparable split in February was 36% (good) versus 53% (bad).
The figure (below) comes with the usual caveat — namely, it’s apples to oranges, and thus represents a “chart crime.” However, people like it. So I use it.
As far as inflation expectations, the expected change in median prices during the next year dropped to 3.1% compared to 3.3% last month, while the longer-term outlook ticked higher to 2.8% from 2.7%.
I’ll leave you with an amusing anecdote which, I assume, reflects expected policy changes in Washington:
Notably, among households with incomes in the top third, just 32% expected improved finances and 16% expected worsening finances, this was the worst overall reading since June 2014; the low came despite one-in-five reporting wealth gains, mainly rising stock and home values.
I feel better when I look at FRED charts, even if they contain noise, like the noise suggesting that people are feeling like they’ve been ground down to a point where they really don’t care about optimistic news, probably because they’ve been burned out for a decade on hyper volatility and whiplash chaos.
I’ve ranted for years about CPI-based data, linked to Nielson survey participants being paid to send in their chaotic data — and I feel the same about the Michigan telephone/internet prepaid incentive approach*. I think the collective participation of a chaotic cohort, provides an ongoing chaotic data sample that makes far too much out of chaotic data trends — but, as usual, none of any of this really matters, but, it helps my blood flow.
https://fred.stlouisfed.org/graph/?g=ClQp
The RAND American Life Panel
Technical Description
University of Michigan MS Internet-panel cohort respondents are those recruited among
people ages 18 years and older who had responded to the MS of the University of Michigan’s
Survey Research Center (SRC). The MS is the leading consumer-sentiment survey, incorporating the long-standing Surveys of Consumers, and is used to produce the widely used Expectations Index.
I find it hard to compare two line series, so I like to plot the correlation coefficient. I’ve not figured out how to do this with FRED, so here’s a Koyfin version of GDP vs consumer sentiment: https://app.koyfin.com/share/12fd11fd3d
Assuming I’m not committing chart crime (a large assumption, but let’s roll with it) then the correlation reinforces Martha’s finding — over 25 years, consumer sentiment really does seem to be a reflection of recent GDP growth — but this chart reveals a period 2012-2018 where they decorrelated.