University of Michigan: Consumer Sentiment Inches Forward

By SBE Council at 24 February, 2023, 9:46 pm

by Raymond J. Keating –

Consumer confidence is moving in the right direction, but still remains well below the historical average. That’s the message from the latest reading on consumer sentiment from the University of Michigan.

The Index of Consumer Sentiment registered 67.0 in February. That compared to 64.9 in January, and 62.8 a year earlier. As reported by the University’s Surveys of Consumers Director Joanne Hsu, “sentiment is now 17 index points above the all-time low from June 2022 but remains almost 20 points below its historical average.”

For good measure, it must be pointed out that the index stood at 101.0 in pre-pandemic February 2020.

It also was noted by Hsu:

“Overall, February’s reading was supported by a 12% improvement in the short-run economic outlook, while all other index components were essentially unchanged. Year-ahead inflation expectations rebounded to 4.1% this month, from 3.9% in January and 4.4% in December.”

There also is considerable uncertainty in the mix regarding inflation. And uncertainty extends to expectations regarding economic growth, or the possibility of recession, as well.

In the end, as SBE Council has pointed out before, the consumer is a follower not a leader in the economy. Actual consumer spending will reflect what’s going on in terms of business investment and hiring. If businesses are expanding, innovating and hiring, then consumers are more than happy to boost their spending.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest book is The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist.