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February 24, 2017 Blog 1 min read
The University of Michigan Consumer Sentiment Index edged up to 96.3 from 95.7 earlier in the month. Economists had expected a more modest increase.

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Sentiment dips in February, but remains near decade high

The index remains below its January cyclical peak of 98.5, but indications are still that U.S. consumers are – on average – still quite upbeat, with sentiment surging since the November election.

Underlying that result though are indications of a much more divided country, as self-defined Democrats are exceptionally pessimistic about the potential negative effects of President Trump’s agenda, offset by the exuberance of survey respondents identifying themselves as Republicans. Independents are, as a result, effectively breaking the tie and are also maintaining a more positive demeanor.

The other underlying dichotomy that is not apparent in the headline index number is the divergence between consumers’ views of current conditions, which remain exceptionally upbeat, and future expectations, which waned moderately in the last month.

With the focus shifting from campaign promises and philosophical goals, consumers may be acknowledging the difficult task ahead for the Trump administration to actually advance his agenda. With still more questions than answers on what will ultimately be signed into law, the timing and degree of impact on the economy is also in question. To a limited degree, the growing acknowledgement of political reality means the bloom may not be off the rose, but it’s certainly withered a bit.

All things considered though, the story is a positive one. Upbeat consumers, fueled by income gains and consistently solid growth in jobs, have both the capacity and optimism to expand their spending habits and provide a solid base for the broad economy to continue to grow

© Jim Baird for PMFA Market Perspectives, 2017.