The University of Michigan’s measure of the consumer sector’s mood declined modestly in September, with the negative impact of the hurricanes that pounded the south likely playing a meaningful role in the dip. The Index of Consumer Sentiment reading of 95.1 in September was down from 96.8 in August – lower, but still consistent with an overall upbeat mood among the nation’s households.
Although sentiment has fallen moderately since reaching cyclical highs earlier this year, the index remains above its level of a year ago and above its long-term average.
While the near-term impact of natural disasters on this scale can be significant in terms of the human toll and physical destruction, the economic disruption tends to be short-lived. As such, the negative impact on the consumer outlook should be temporary.
That the aggregate consumer mood remains upbeat against the backdrop of several negatives should not be overlooked. The sharp political (and not exclusively partisan) divide in Washington that has effectively bottled up any of the anticipated meaningful fiscal juice for the economy, the tense geopolitical standoff with North Korea, and the destruction and economic fallout caused by the recent spate of hurricanes are all noteworthy. In addition, the Fed continues along its path of gradually normalizing monetary policy, and rising interest rates could crimp consumer appetite for high-ticket purchases at least at the margins.
Even so, the economy continues to chug along. Job gains remain robust as the slack in labor markets has largely disappeared. Inflation remains well in check. And, of course, there are signs of a more synchronized, growing global economy. While economic growth picked up in Q2, it remains to be seen whether or not above trend growth can be sustained. For now, consumers appear content to shrug off the potential risks and focus on the positives, proving once again the relative resilience of the consumer sector, even in the face of challenges.
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