US Consumer Sentiment Remains Strong, but Sources of Uncertainty Are 'Stirring'

The preliminary University of Michigan Consumer Sentiment Index rose from a January reading of 99.8 to February’s preliminary level of 100.9. When the preliminary January index score was reported last month, the index reflected a slight decline to 99.1. Economists polled by Bloomberg were expecting a preliminary February reading of 99.7.

The final index reading in February of last year was 93.8. The 7.6% year-over-year increase was due primarily to consumers’ views on the strength of the U.S. economy and their own personal financial situations.

Noting that the February score nearly matched the current economic expansion’s peak score of 101.4 set in March of 2018, the survey’s chief economist, Richard Curtin, commented:

The early February gain was not uniform, however. Current personal finances as well as evaluations of the national economy each posted large gains, while consumers’ views on buying conditions for household durables posted a significant loss. The overall balance still moved the Sentiment and Expectations Indexes higher.

Curtin continued, “Net gains in household income and wealth were reported more frequently in early February than at any prior time since 1960.”

The consumer expectations subindex rose by 2.1 points month over month, from 90.5 to 92.6 (2.3%), while the current conditions subindex decreased from 114.4 to 113.8 (0.5%).

Year over year, the current conditions subindex improved by 4.9% and the consumer expectations subindex rose by 9.7%.

In closing, Curtin noted:

[A] faint stirring of two powerful sources of uncertainty: First, the coronavirus was mentioned by just 7% when asked to explain their economic expectations in early February. Second, the runup to the presidential election is likely to focus on the vast changes to taxes and spending programs; in early February, only 10% of all consumers mentioned some aspect of the election as having a potential impact on their economic expectations.