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May 25, 2018 Blog 1 min read
Although their assessment of current economic conditions weakened modestly, consumers are increasingly upbeat about the outlook for continued growth.

Wealth Management Consumer Sentiment Chart 

The University of Michigan’s Consumer Sentiment index fell fractionally in May to 98.0, on a modestly weaker assessment of the current state of the economy.

Despite that downtick, the overall mood of consumers remains quite positive, buoyed by a strong job market and a positive self-assessment of their personal financial situations.

Beyond the headline number, optimism about the outlook for the economy in the coming months remains on an upswing, which bodes relatively well for future consumption.

There have been some signs of a moderate pickup in personal income – likely a reflection of reduced tax withholdings for many workers and some pickup in the rate of wage growth. Given the seeming tightness of labor market conditions though, it may be surprising that wage gains are not better than they have been.

Moreover, there appears to be some emerging skepticism about whether or not wage gains will actually increase enough to offset expected inflationary pressures and rising interest rates, despite an expectation of continued job market strength.

Consumers are taking notice of rising prices on higher ticket purchases including cars and homes – a dynamic that would be further exacerbated by higher interest rates.

Still, these concerns are at the margins, and while they shouldn’t be dismissed, they also don’t change what is still a very positive outlook. Consumers remain very upbeat, even though spending habits have been more restrained than in the prior expansion. It’s likely that memories of the housing crash and excess household indebtedness at the time haven’t completely faded, and is still influencing spending behaviors. And that’s not necessarily a bad thing from a longer-term perspective, if it contributes to better and more sustainable financial decision-making at the household level.  

 

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