Revisions to the University of Michigan’s Consumer Sentiment index may have been modestly less rosy than the prior release, but the story is largely unchanged. The index reading for March was revised lower to 101.4 from the previous estimate of 102, still a very positive result.
The modest decline notwithstanding, consumers remain a very upbeat group.
Perhaps the most notable development was the significant increase in the views of lower-income households. In recent years, optimism had been more concentrated among higher-income earners, who benefited disproportionately from strong equity markets, growing net worth, and stronger job conditions and wage growth across higher-paying jobs.
The surge in sentiment among lower-income Americans is noteworthy, with the positive effects of lower taxes boosting take-home pay for many. Moreover, continued improvement in job conditions for workers in lower paying jobs, tighter job markets forcing entry-level wages higher, and the return of previously sidelined individuals to the workforce are all positives.
The fundamental underpinnings for the economy remain generally solid, although the rising concerns about tariffs and a potential widening trade conflict have recently introduced an additional source of risk. Whether all parties are willing and able to take steps to cool those tensions remains to be seen, but the risk of trade tensions bubbling over appears greater than it has been in some time.
Nonetheless, the consumer remains a key pillar to the strength of the U.S. economy, and confident consumers are more likely to spend. With disposable income rising, there appears to be both the willingness and capacity for households to continue to contribute to the virtuous cycle of a growing economy that is entering its tenth year of expansion in the coming months.
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