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October 12, 2018 Blog 1 min read
Consumer optimism ebbed in October, but in this case, “less optimistic” is still quite positive.
October Consumer SentimentThe University of Michigan’s Consumer Sentiment index dipped moderately in October to 99.0, falling short of consensus economist expectations of 100.5. Still, consumer sentiment remains strong and has shown little sign of meaningful slippage this year, despite of a host of uncertainties. The October reading also remains above the average for 2018. The decline in the index reflected some reduction in enthusiasm for not only the current state of the economy, but also the outlook from here.

Given the timing of the survey, the negative impact of the recent selloff in stocks was not fully reflected in the responses of those surveyed. As such, it’s possible that that the update in two weeks will show some further erosion in confidence if the recent downdraft isn’t reversed in the intervening period.

It’s important to not lose sight of the big picture. “Less optimistic” in this case is still quite optimistic. The “slightly less upbeat” view of the current state of the economy is still very upbeat. Directionally, it was a small step back, but it by no means suggests that consumers are souring in their views.

Consumers are still happy with the state of the economy, and expect growth to continue. Despite the recent turmoil in Washington and sharp divide on a range of policy matters, confidence in the government’s economic policies remains high – the highest in the past 15 years.

It’s possible that growth peaked in the second quarter at 4.2% and that it will moderate in the second half of the year. It would be difficult for the economy to sustain growth above 4% for an extended period. Nonetheless, even if it slows, there is very little evidence that the economy is at risk of stalling outright.

That doesn’t appear to be lost on consumers, and that positive outlook should help to sustain household spending – a critical support to the strength of the overall economy. Near-term, it could also serve as a positive indicator for retailers as we inch closer to the start of the holiday shopping season.
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