U.S. consumer sentiment exceeded estimates in April on Americans’ increasingly favorable views of their finances, University of Michigan survey data showed April 27.
Highlights of Final Michigan April Sentiment
• Sentiment index fell to 98.8 (estimated 98) from 101.4 in March; preliminary reading was 97.8.
• Current conditions gauge, which measures Americans’ perceptions of their finances, dipped to 114.9 from record 121.2 in the prior month; preliminary reading was 115.
• Expectations measure eased to 88.4 from 88.8; preliminary reading was 86.8.
• Year-ahead inflation expectations dipped to 2.7% from 2.8% in prior month.
While the decline reflected negative sentiment about the effect of tariffs on the economy, consumers remained upbeat about their financial situation, partly a reflection of the recent tax legislation, according to the University of Michigan.
Recent income gains were reported by 25% of respondents, up from 18% a year ago. Some 40% expected income gains, on par with the average over the past year.
Even with the cooling, sentiment remains elevated by historical standards, higher than any other annual average since 2000. That, along with tax cuts that have boosted Americans’ disposable income, bodes well for a pickup in consumer spending after a 1.1% annualized advance in the first quarter as reported earlier April 27 by the Commerce Department.
According to the university, the level of sentiment is consistent with 2.7% real personal consumption in the coming year.
While consumers pulled back last quarter, solid business investment, higher employee compensation and tax cuts are expected to buoy growth in the second quarter, in line with the Federal Reserve’s view that the factors holding back growth were transitory.
A measure of inflation in the GDP report, tied to consumer spending and excluding volatile food and energy costs, advanced at a 2.5% annualized pace, the fastest since 2011, adding to signs that price gains are picking up. The Michigan survey showed consumers expect inflation to average 2.5% over the next five years.
“Overall, I still have a favorable view of how consumers are viewing the economy, though I’d like to stress again this is about as good as it gets.” — Richard Curtin, director of the University of Michigan consumer survey, on a Bloomberg conference call.