The Ann Arbor-based University of Michigan Surveys of Consumers found consumer sentiment in its November 2019 survey nearly identical to the average level recorded since the start of 2017 (96.8 versus 97). In 30 of the past 35 months, the Sentiment Index was 95 or higher, a level of optimism second only to when the index was above 100 for 34 out of 36 months from January 1998 to December 2000.
Although impeachment proceedings occurred in both time periods, in the earlier period it did not cause an overall loss of confidence, says U-M economist Richard Curtin, director of the surveys. The current proceedings have not influenced economic confidence but may in the months ahead, he says.
Curtin also notes a major difference between the two impeachment eras: the current situation is accompanied by sharper partisan divisions. The divisions have kept the Sentiment Index unchanged at favorable levels, showing only small monthly variations. Overall, the data indicate that consumer spending will grow by 2.5 percent in 2020.
“At no other time in the past half century have the divisions in economic expectations been as wide among consumers as well as between consumers and business firms,” says Curtin. “While the partisan divisions among consumers are wide, consumer spending will continue to offset the weaknesses in business investment spending to maintain the expansion, although at a slower pace of growth.
“There are significant risks associated with tariffs, impeachment, the election, global growth, and geopolitical events. It has been differences in how these risks have been assessed that underlie the partisan differences among consumers and the gap in optimism between the business and consumer sectors.”
Consumers said they anticipate that inflation, unemployment, and interest rates will remain at favorable levels in the year ahead, although they do not expect continued declines, says Curtin. The near- and longer-term outlooks for the national economy improved in November, with the data tilting toward the expectation of continued expansion during the year ahead.
About 54 percent of households reported their finances had recently improved. There have been only nine other surveys in the past 50 years that recorded a higher percentage, and the all-time peak was 57 percent.
Households across the income distribution expected to gain 4.6 percent in 2020. This was among consumers under 45, who are most likely to be employed.
The Consumer Sentiment Index rose to 96.8 in November, posting its third monthly increase, but remained slightly below last November’s 97.5. The Expectation Index rose slightly to 87.3 from October’s 84.2 but remained below last year’s 88.1. The Current Conditions Index fell to 111.6 from last month’s 113.2 and last year’s 112.3.
The Surveys of Consumers is a rotating panel survey based on a nationally representative sample that gives each household in the U.S. an equal chance of being selected. Interviews are conducted throughout the month by telephone. The minimum monthly change required for significance at the 95 percent level in the Sentiment Index is 4.8 points; for the Current and Expectations Indexes, the minimum is 6 points. This means that increases or decreases smaller than these point values are considered flat.
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