The University of Michigan Consumer Sentiment Index preliminary report for May came in at 72.4, an improvement over the April final of 69.8. The Briefing.com consensus expectation had been for 69.5 and Briefing.com’s own forecast was for 70.5. The rise in gasoline prices, often a drag on sentiment, apparently hasn’t taken a toll on the mood of the consumer on the past month. The preliminary result for this month must be classified as an upside surprise.
See the chart below for a long-term perspective on this widely watched index. Because the sentiment index has trended upward since its inception in 1978, I’ve added a linear regression to help understand the pattern of reversion to the trend. I’ve also highlighted recessions and included real GDP to help evaluate the Michigan Consumer Sentiment Index as an indicator of the broader economy.
To put today’s report into the larger historical context since its beginning in 1978, consumer sentiment is about 16% below the average reading (arithmetic mean), 15% below the geometric mean, and 17% below the regression line on the chart above. The current index level is at the 19th percentile of the 401 monthly data points in this series.
For the sake of comparison here is a chart of the Conference Board’s Consumer Confidence Index (monthly update here). The Conference Board Index is the more volatile of the two, but the general pattern and trend are remarkably similar to the Michigan Index.
Consumer and small business sentiment remains at or near levels associated with other recent recessions, but the trend has been one of general improvement.
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Michigan Consumer Sentiment Continues Rebound by Doug Short
Conference Board: Consumer Confidence in Modest Recovery by Doug Short and John Lounsbury
Conference Board Confirms Consumer Relapse by Doug Short
Small Business Sentiment Setback in March by Doug Short
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