Consumer Sentiment Rises as Household Finances Improve
Consumer confidence rose in March as Americans were more satisfied than any time in 16 years with the current state of their finances and the economy, while remaining sharply divided along party lines about the outlook.
The University of Michigan said March 17 that its preliminary index of sentiment increased to 97.6 from 96.3 in February. The median projection in a Bloomberg survey called for 97, with estimates ranging from 95 to 100. The index of current conditions jumped three points to 114.5, the highest reading since November 2000.
Households reported net gains in incomes and wealth at the strongest levels in a decade, while Republicans were “much more optimistic” than Democrats about expectations for their finances, according to the survey. Confidence is still near a 13-year high amid a stronger job market and prospects for faster growth under the new administration, but threatens to wane absent more concrete policy action.
“The sentiment data has been characterized by rising optimism as well as by rising uncertainty due to the partisan divide,” Richard Curtin, director of the University of Michigan consumer survey, said in a statement. “Optimism promotes discretionary spending, and uncertainty makes consumers more cautious spenders.”
The gauge of expectations was little changed at 86.7 from a three-month low of 86.5 in February.
Among Republicans, the expectations index was at 122.4, while it was 55.3 for Democrats, showcasing the divide in the outlook since Donald Trump’s election victory. Eighty-seven% of Republicans expect continued gains in the economy over the next five years, compared with 22% of Democrats, according to the survey.
Respondents expected the inflation rate in the next year will be 2.4%, compared with 2.7% in the February survey. Over the next five to 10 years, they project a 2.2% rate of price growth, the lowest reading since 1980, after 2.5% in the prior month.
