Monday, 16 of July of 2018

Economics. Explained.  

Consumer Sentiment

July 13, 2018

The preliminary reading for consumer sentiment for July fell 1.1 points to 97.1 after having risen 0.2 point in June.  March’s level of 101.4 was the highest level of sentiment since January 2004.  Thus, it remains at a very lofty level.

Richard Curtin, the chief economist for the Surveys of Consumers, said, ” So far, the strength in jobs and incomes has overcome higher inflation and interest rates. The darkening cloud on the horizon, however, is due to rising concerns about the potential negative impact of tariffs on the domestic economy.”

Given the tax cuts we expect GDP growth to climb from 2.6% in 2017 to 3.0% 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 3.5% 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 2.2% 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 2.2% by the end of 2018.

The June changes in both the current conditions and expectations components were statistically insignificant.

Consumer expectations for six months was essentially unchanged at 86.4.

Consumers’ assessment of current conditions fell 2.6 points from 116.5 to 113.9.

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 2.5% in 2018.

Stephen Slifer

NumberNomics

Charleston, SC


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