The University of Michigan Consumer Sentiment Index final report for May came in at 74.3, an unexpected improvement over both the April final of 69.8 and the May preliminary reading of 72.4. The Briefing.com consensus expectation had been for 72.4 and Briefing.com’s own forecast was for 72.6. The rise in gasoline prices, often a drag on sentiment, hasn’t taken a toll on the mood of the consumer.
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 14% below the average reading (arithmetic mean), 12% below the geometric mean, and 15% below the regression line on the chart above. The current index level is at the 23rd percentile of the 401 monthly data points in this series.
The Michigan average over since its inception is 86. During non-recessionary years the average is 88.9. The average during the five recessions is 69.3.
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 close to levels associated with other recent recessions, but the trend has been one of general improvement.
Michigan Consumer Sentiment – Up Again by Doug Short
Small Business Sentiment: Gloom Continued in April by Doug Short
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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