Thursday, 19 of April of 2018

Economics. Explained.  

Consumer Sentiment

April 13, 2018

Consumer sentiment for April fell 3.6 points to 97.8 from March’s level of 101.4 which was the highest level of sentiment since January 2004.  The market had expected sentiment to slip to 101.0.

Richard Curtin, the chief economist for the Surveys of Consumers, said, “The small decline was widely shared by all age and income subgroups and across all regions of the country. Importantly, confidence still remains relatively high, despite the recent losses that were mainly due to concerns about the potential impact of Trump’s trade policies on the domestic economy. Uncertainty surrounding the evolving trade policy has caused many small (and at times inconsistent) changes in expectations.”

Given the tax cuts we expect GDP growth to climb from 2.5% in 2017 to 2.8% in 2018.  We expect the economic speed limit to be raised from 1.8% to 2.8% within a few years.  That will accelerate growth in our standard of living.  We expect worker compensation to increase 3.0% in 2018 vs. 1.8% last year. The core inflation rate (excluding the volatile food and energy components) rose 1.8% in 2017 but should climb by 2.4% in 2018.  Such a scenario would keep the Fed on track for the very gradual increases in interest rates that it has noted previously.  Specifically, we expect the funds rate to be 2.1% by the end of 2018.

The April drop in overall sentiment was caused entirely by a drop in both the current conditions and expectations components.

Consumer expectations for six months from now fell 2.0 points from 88.8 to 86.8.

Consumers’ assessment of current conditions declined 6.2  points from 121.2 to 115.0.

Trends in the Conference Board measure of consumer confidence and the University of Michigan series on sentiment move in tandem, but there are often month-to-month fluctuations.  Both series remain at levels that are consistent with steady growth in consumer spending at a reasonable clip of about 2.6% in 2018.

Stephen Slifer

NumberNomics

Charleston, SC


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