Monday, 11 of December of 2017

Economics. Explained.  

Consumer Sentiment

December 8, 2017

C.consumer sentiment fell 1.7 points in December to 96.8 after having declined 2.2 points in November.   Both months are somewhat 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 “Consumer sentiment has remained quite favorable although it continued to slowly recede in early December from its October cyclical peak. Most of the recent decline was concentrated in the long-term prospects for the economy, while consumers thought current economic conditions have continued to improve.”

Given the rebuilding effort following hurricanes Harvey and Irma and an expectation of major changes in policy likely to be implemented between now and yearend, we expect GDP growth for 2017 to be 2.6% and 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 3.5% in 2018 vs. 1.4% this year. The core inflation rate should slow somewhat this year to 1.8% thanks to a price war in the cell phone industry and falling prescription good prices caused by intimidation from President Trump.   However prices should rise by 2.3% 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 1.25% by the end of 2017 and 2.0% by the end of 2018.

The drop in sentiment was only in the expectations component.

Consumer expectations for six months from now fell 88.9 to 84.6.

Consumers’ assessment of current conditions rose from 113.5 to 115.9.

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 2.6% in 2018.

Stephen Slifer

NumberNomics

Charleston, SC


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