You can only work to the best of your ability if you know what your clients are thinking.
The University of Michigan tracks consumer sentiment and shares monthly updates. For August 2023, they found sentiment had reached 71.2 index points, a slight drop off from previous gains in consumer sentiment. The projections for current economic conditions came in at 77.4, a small increase from 76.6 in July, while Consumer Expectations Index fell only one point month over month (68.3 to 67.3).
These changes might seem meager, but consumer sentiment shows substantial growth from where it stood in the summer of 2022. The index reached a historic low point of 50% in 2022, comparable to levels seen during the 2008 housing crash. The disparity between the listed month over month change to consumer sentiment (-0.6%) and the year over year change (+22.3%) tells it all.
Even so, why does the average level of consumer sentiment–defined by the University of Michigan as 86 index points–remain elusive?
In response to the news of consumer sentiment, Investor and Obama administration alum Steven Rattner tweeted:
“Though consumer sentiment has improved in recent months, it is still far below what we might expect given the “actual” state of the economy (as measured by unemployment and inflation).”
Observers have suggested that even though slowing inflation has given consumers sentiments a boost, tangible economic conditions are not changing enough for a larger one. Ryan Sweet, chief U.S. economist at Oxford Economics, said that rising gas prices (a near-universal economic condition and bellwether) will likely drag sentiment down further.
“In general, consumers perceived few material differences in the economic environment from last month, but they saw substantial improvements relative to just three months ago,” said the University of Michigan’s director of surveys, Joanne Hsu.
The Federal Reserve recently raised interest rates by 25 basis points at their July 2023 meeting. It remains to be seen if this will reign in inflation, which recently experienced a slight bump. Even so, it seems that lower inflation alone may not be enough to bolster consumer sentiment.
For the full index, visit http://www.sca.isr.umich.edu/.
