Consumer Sentiment Stays Strong in 2019

Consumer sentiment is the measure of how optimistic consumers feel about their finances and the state of the economy. There are two major reporters of consumer sentiment: The Consumer Confidence Index by the Conference Board and the Michigan Consumer Sentiment Index by the University of Michigan. These are both conducted by household survey and report monthly.

For November 2019, the Michigan Consumer Sentiment Index reported a Consumer Sentiment Index of 96.8, making 30 of the past 35 months hold an index of 95 or higher. This is an extremely good sign as we have not seen this kind of optimism since January 1998-December 2000, when the score was 100 for 34 out of 36 months. The Consumer Sentiment Index has now seen an increase three months in a row.

Consumer sentiment has a large impact on economic and public policy. The calculation of the Gross Domestic Product (GDP) is 70% dependent upon consumer spending, making consumer sentiment a large contributing factor in understanding the United States’ economic health.

High consumer sentiment means that citizens feel confident about the future and spend more money, boosting the economy. Whenever the sentiment index is low, citizens are more likely to save money and make fewer purchases. The demand for goods and services affects corporate investments, stock market, and job opportunities. The University of Michigan states that their data suggests a 2.5% growth in consumer spending in 2020.

There are factors that might affect these numbers, such as impeachment, the upcoming election, tariffs, global growth, and geopolitical events. Consumers do not expect to see major changes in economic factors such as inflation, unemployment rates, and interest rates. The survey reports that 54% of consumers have seen recent improvement to their finances, one of the highest reports in 50 years, with only nine others being higher in that time frame (57% being the all-time highest). Consumers of all income levels reported an expected gain in income in the coming year. With only one month left in 2019, we’re excited to see such a positive report and look forward to continued economic growth in the new year. What a great way to start off a new decade!

Sources:

1. https://www.investopedia.com/terms/c/consumer-sentiment.asp
2. https://news.umich.edu/consumer-confidence-propels-economy-forward/