American consumer attitudes were “mixed” in early February, according to the preliminary vintage of this month’s University of Michigan sentiment survey.
Technically, sentiment improved to its best levels in more than a year, but the uptick from January’s final reading was minuscule. The current conditions gauge rose, while the expectations index actually slipped, albeit only fractionally.
The 66.4 headline was better than the 65 consensus expected. More than 50 economists ventured a guess. The lowest estimate was 58.9, the highest 69.
The disparity between survey-measured sentiment and PMIs is notable. I should add a caveat to account for January’s robust ISM services print, though.
The early read on February sentiment comes as a Gallup poll suggested half of Americans believe+ they’re worse off financially compared to a year ago, even as 60% expect things to get better going forward.
Michigan survey director Joanne Hsu underscored the ambiguous nature of the current macro conjuncture. “Recent developments in the economy, both positive and negative, have led to mixed attitudes among consumers,” she said Friday.
She noted that although sentiment has obviously improved, it’s “still 14% below two years ago, prior to the current inflationary episode.” It’s actually 25% below April of 2021, the month headline CPI began to accelerate in earnest.
Speaking of inflation, year-ahead expectations rose to 4.2%. That was higher than the 4% consensus expected and up substantially from January’s 3.9%, which was the lowest since — you guessed it — April of 2021. Next-five year expectations were unchanged at 2.9%, though. That’s what the Fed cares about.
“Overall, high prices continue to weigh on consumers despite the recent moderation in inflation,” Hsu went on to say, adding that the jump in year-ahead price growth expectations was “concentrated among middle-income consumers and those over the age of 65.”
On the bright side, this year’s simultaneous stock and bond rally, which has a standard 60/40 portfolio off to its ninth best start to a calendar year+ in a century, is helping to cheer up “some parts of the population.” As Hsu put it, “consumers with large stock holdings reported higher sentiment this month, particularly in how they currently assess their personal finances.”
For an alternative view of the Summers/El Erian diatribes versus the FOMC take a look at David Rosenberg’s work. You can go on Twitter and see his recent seminar. To sum his beliefs, inflation in the last 6 months is basically zero and the housing price component of CPI which is weaker (30%-40% of the index) will catch up in the inflation statistics starting in the second quarter 2023 and pull the CPI index to a significantly lower number. Rosenberg is a bond bull and is bullish on stocks after a correction later this year.