Optimists claimed a small victory in the tug of war for control of the macro narrative Tuesday, when a measure of US consumer confidence came in better than expected.
I’d note, up front, that any evidence to support the notion that households aren’t feeling glum is at odds with the University of Michigan sentiment survey, which is loitering, forlorn, at a decade nadir.
Be that as it may, the Conference Board’s indicator printed 106.4 for this month, down from April, but markedly higher than consensus. In fact, the headline nearly matched the most optimistic guess from more than four-dozen economists.
The figure (above) shows the disparity between the two widely-cited gauges. “The divergence between U Mich and Conference Board remains notable,” BMO’s Ian Lyngen said. “This is largely a function of the fact the former is more influenced by stocks and gasoline prices while the latter is linked to employment.”
Speaking of employment, the Present Situation Index in the Conference Board report dropped, with the decline attributable “solely” to a less enthusiastic assessment of the labor market.
Indeed, the labor differential fell to 39.3 from 44.7, the lowest in a year. That’s topical this week with payrolls on deck.
As you might expect, purchase intentions softened for cars, durables and houses. That, Lynn Franco, Senior Director of Economic Indicators, said, is “likely a reflection of rising interest rates and consumers pivoting from big-ticket items to spending on services.”
It’s also “likely a reflection” of inflation, a reality Franco readily acknowledged. “Inflation remains top of mind,” she remarked, on the way to suggesting that going forward, “surging prices and additional interest rate hikes” may present “downside risks” for consumption.
I participated in the U Mich Survey for almost two years during the Obama presidency. I remember having some perception that democrats were keen that high gas prices (as an asset) would reduce demand for the larger internal combustion engines, the latter being a highly desired outcome by them. On my final survey I got a question concerning: at what price would gasoline have to be for you to consider purchasing a more fuel efficient vehicle. I reacted negatively (question did not belong in the survey imo…) to the question and they never called back.
I’ve always wondered who participates in these surveys, and have never trusted them. The only surveys I have participated in I have given false or exaggerated answers, just to make a point. Actually I don’t trust most of the manipulated data we are fed, especially inflation numbers…
I was in the survey sample last month. The questions are pretty straightforward. While I don’t know what the process used in is, as a general matter outlier responses can easily be discarded or de-weighted.
It seems very likely that the US/global consumer is shifting back to consuming services instead of durables/stuff- which was the long term trend solidly in place before being sidelined by covid.
Who cares about a new refrigerator anymore when you freely can go out to eat? So now we are back to people preferring to spend their money eating out, traveling, experiences, etc.
Where I am- the restaurants and cafes are fairly crowded and high tourist season hasn’t even started.