Led by a jump in both current conditions and consumer expectations, University of Michigan's Sentiment Survey jumped from 96.2 to 100.8, handily beating expectations of a 96.6 print, and the second highest level since 2004-only behind the March 2018 reading of 101.4. A snapshot of the report:
- Sentiment index increased to 100.8 (est. 96.6) from prior month’s 96.2, the highest since March and the second highest going back for years.
- Current conditions, which measures Americans’ perceptions of their finances, rose to 116.1 from 110.3 in July; the biggest jump since March
Reflecting optimism about the economy, the Expectations Index reached its highest level since July 2004, largely due to more favorable prospects for jobs and incomes.
The gains were widespread across all major socioeconomic subgroups according to the report.
Despite a lessening of expected gains in nominal incomes in September, inflation expectations also declined, acting to offset concerns about declining living standards, with the 1 year inflation expectation dropping from 3.0% to 2.8%.
According to UMich chief economist Richard Curtin, consumers anticipated continued growth in the economy that would produce more jobs and an even lower unemployment rate during the year ahead.
Of note: buying conditions for both houses and vehicles posted a sharp rebound after declining inexplicably in recent months, and defying reports of near record optimism.
And yet, while consumers were somewhat more likely to anticipate that the economic expansion would continue uninterrupted over the next five years, nearly as many expected another downturn sometime in the next five years.
As one would expect, the largest problem cited on the economic horizon involved the anticipated negative impact from tariffs. Concerns about the negative impact of tariffs on the domestic economy were spontaneously mentioned by nearly one-third of all consumers in the past three months, up from one-in-five in the prior four months.