Join +750K new investors every month who copy stock picks from billionaire's portfoliosSign Up Free

Michigan Consumer Sentiment: Highest Since October 2007

Published 05/26/2012, 09:57 AM
Updated 07/09/2023, 06:31 AM
GEOM
-
NOTE
-
Note from dshort: Here is a late update on today's strong Michigan Sentiment data, which came out while I was visiting the Vietnam Veterans Memorial here in DC, a day in advance of the 25th Rolling Thunder tribute.

The University of Michigan Consumer Sentiment Index Final number for May came in at 79.3, which is the highest reading since October 2007, two months before the NBER's date for the onset of the last recession. Today's number was above the Briefing.com's consensus forecast of 77.5.

See the chart below for a long-term perspective on this widely watched index. Because the sentiment index has trended upward since its inception in 1978, I've added a linear regression to help understand the pattern of reversion to the trend. I've also highlighted recessions and included real GDP to help evaluate the correlation between the Michigan Consumer Sentiment Index and the broader economy.

Michigan-consumer-sentiment-index
To put today's report into the larger historical context since its beginning in 1978, consumer sentiment is about 7% below the average reading (arithmetic mean), 6% below the geometric mean, and 7% below the regression line on the chart above. The current index level is at the 32.7 percentile of the 413 monthly data points in this series.

The Michigan average since its inception is 85.5. During non-recessionary years the average is 88.0. The average during the five recessions is 69.3. So the latest sentiment number of 79.3 puts us just above the midpoint (78.7) between recessionary and non-recessionary sentiment averages.

The indicator can be somewhat volatile. For a visual sense of the volatility here is a chart with the monthly data and a three-month moving average.
Michigan-consumer-sentiment-3-month-ma
For the sake of comparison here is a chart of the Conference Board's Consumer Confidence Index (monthly update here). The Conference Board Index is the more volatile of the two, but the broad pattern and general trends are remarkably similar to the Michigan Index.
Conference-Board-consumer-confidence-index
And finally, the prevailing mood of the Michigan survey is also similar to the mood of small business owners, as captured by the NFIB Business Optimism Index (monthly update here).

NFIB-optimism-index
The trend in sentiment since the Financial Crisis lows had been one of slow improvement, but it topped out in February of last year at 77.5 and plunged to an interim low of 55.7 in August. The steady rise since the August trough has been encouraging. And today's report is another welcome continuation of the trend, despite the ongoing media focus on the financial anxieties in the Eurozone.

Latest comments

Loading next article…
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.