The last of this week’s sparse US economic data was mercifully upbeat. Or as upbeat as could reasonably be expected under the circumstances.
University of Michigan consumer sentiment printed 59.1 in the preliminary read for December, ahead of estimates and up from November’s 56.8.
Obviously, the gauge still reflects extreme consternation or, as survey director Joanne Hsu put it, the index “remain[s] low from a historical perspective.” The figure (below) illustrates the point.
I’m not sure we need the euphemisms. Consumer sentiment isn’t actually “upbeat” and while it’s most assuredly “low,” somehow that adjective seems inadequate. Consumer sentiment is abysmal in the US. It’s been parked at or near the worst levels in history for most of the year.
But, if you’re the glass half-full type, you’ll be happy to know that both the current conditions index and the expectations gauge improved in early December.
The rally on Wall Street helped. Or at least it did for Americans fortunate enough to own stocks. “Gains in the sentiment index were seen across multiple demographic groups, with particularly large increases for higher-income families and those with larger stock holdings,” Hsu went on to say.
As a reminder you hopefully don’t need, “Americans” (where that means the vast majority of the populace) don’t own any stocks. Not relatively speaking, anyway. The Top 10% own substantially all of the equities, but more importantly, the Top 1% is the only cohort whose share has grown over the past three decades, at least when broken down as shown in the figure (below).
Those figures are current through Q2 (the most recent available data). I won’t mince words: The numbers suggest American capitalism is a joke that almost no one is in on. If you’re in the 90th to 99th percentiles, your share of the stock market has fallen by more than four percentage points since 1989. Over time, the upper-middle class is suffering the same fate as the middle class — they’re disappearing into economic obscurity. Slowly, yes. But surely, also.
Anyway, it won’t surprise you to learn that sentiment among Democrats and Independents improved over the month in the Michigan poll, likely due in part to the favorable midterm results. For Republicans, sentiment deteriorated.
Concerns over inflation were pervasive, but moderated. Indeed, year-ahead inflation expectations receded sharply, to “just” 4.6%. That’s the lowest in 15 months (figure below), and probably came courtesy of lower gas prices.
Obviously, 4.6% is still much too high for comfort, and 5-10 year expectations remained stuck at 3%. They’ve been rangebound for 16 of the past 17 months, Hsu noted, adding that “declines in short-run inflation expectations were visible across the distribution of age, income, education, as well as political party identification.”
Although buying patterns have changed, aggregate consumer spending is “robust,” Hsu said Friday. That’s thanks to ongoing strength in incomes.
All in all, the preliminary read on Michigan sentiment for this month was passable. At the margins, it might help offset the unwelcome upside surprise from producer prices on Friday morning. But everything hangs on next week’s CPI print and, of course, the December Fed meeting.
