Thursday, 22 of February of 2018

Economics. Explained.  

Consumer Sentiment

February 16, 2018

The preliminary estimate of consumer sentiment rose  2.2 points in February to 99.9 after having declined 0.2 point in January.  The February level is just a shade below the 100.7 reading for October which was the highest level of sentiment since January 2004.

Richard Curtin, the chief economist for the Surveys of Consumers, said “Stock market gyrations were dominated by rising incomes, employment growth, and by net favorable perceptions of the tax reforms. Indeed, when asked to identify any recent economic news they had heard, negative references to stock prices were spontaneously cited by just 6% of all consumers. In contrast, favorable references to government policies were cited by 35% in February, unchanged from January, and the highest level recorded in more than a half century.

Given the tax cuts we expect GDP growth to climb from 2.5% in 2017 to 2.9% 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 2.0% by the end of 2018.

The two components of the overall index both rose in February.

Consumer expectations for six months from now rose 3.9 points from 86.3 to 90.2.

Consumers’ assessment of current conditions rose 4.6 points from 110.5 to 115.1.

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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