Consumer sentiment among US residents surged in March to its highest value since 2004, according to the University of Michigan. An improving job market, expectations of increased disposable income from tax cuts, and prospects for continued economic growth offset concerns about tariffs and stock market volatility triggered by the US president’s impulsive tweets and policy shifts.
- Growing confidence should help to stimulate consumer spending, roughly 69 percent of the US economy in the first quarter of 2018.
- The University of Michigan updates its Consumer Sentiment Index monthly based on the results of a 50-question survey of at least 500 residents of the continental US. The index seeks to capture consumer views of their own financial situation, the short-term general economy, and the long-term general economy.
The general distrust of US citizens toward big government is part of the national fabric dating back to its independence and is born out today in patterns of popularity of US presidents and the policies they represent compared to consumer sentiment.
- The Vietnam War, Nixon's Watergate scandal, and racial strife in America contributed to a steady decline in consumer sentiment starting in 1964 to 1970, yielding abysmal approval ratings for sitting US presidents. It was 1980, however, that brought the Index to all-time lows as US economic conditions took a toll on consumer confidence and contributed to volatility in Reagan's popularity.
- While under President Clinton consumer sentiment rose markedly, it crashed again under Bush and recovered somewhat under Obama and in the early days of the Trump administration. The index has yet to return to the levels witnessed under the strong economic conditions of the 1990s.
- The Consumer Sentiment Index is sensitive to income and age differences among survey respondents. Unsurprisingly, the population at the lowest third of income always has the lowest index score. After the 2008 economic depression, the spread of index scores among the income brackets shrank dramatically and began spreadign again only in 2016 and 2017. Examining sentiment by age, 18-34 year olds have been reliably more confident than the 55+ population, reflecting the financial uncertainty of fixed income and social safety net in retirement.