Consumer Sentiment Index Rebounds by February End, With a Caveat

Shoppers at Third Street Promenade outdoor shopping mall on August 17, 2012 in Santa Monica, California. (Photo: Reuters)

The University of Michigan final consumer sentiment index for February registered at 91.7, up from a preliminary reading of 90.7 and a final January reading of 92.0.

“Consumer confidence nearly recovered the entire small loss it recorded at mid month, with the Sentiment Index finishing February just 0.3 Index-points below January,” said Surveys of Consumers chief economist, Richard Curtin. “Although consumers are not as optimistic as at the start of last year, the Sentiment Index is just 6.5% below the cyclical peak of 98.1 set in January 2015. Such a small decline is hardly consistent with the onset of a downturn in consumer spending.”

While Curtain said the current 6.5% decline “hardly merits a recession warning,” it does indicate a somewhat slower expansion in consumer expenditures-to 2.7% in 2016, down from 3.1% in 2015. He added that the impact on the labor market, however, will be measurable.

“Rather modest wage gains as well as very low inflation have meant that consumers expect increases in their real incomes during the year ahead,” Curtain said. “Consumers’ most important concern involves how much the slowdown in GDP growth will affect employment growth. At present, consumers anticipate only a slight negative impact on jobs.”

Economists surveyed by The Wall Street Journal had expected the February index would hold at 90.7.