Consumer Sentiment Holds Steady, Remains Higher Than 5 Years Ago

Consumer Sentiment Holds Steady, Remains Higher Than 5 Years Ago

U.S. consumer sentiment held steady amid a modest gain in American household expectations, according to a University of Michigan report Friday.

The consumer sentiment index held steady at a solid 98.8 for preliminary May, the University of Michigan’s Consumer Survey Center reported.

The comparable April reading was also revised from 97.8 to 98.8, inline with May’s result.

Even with the April monthly setback, confidence remains elevated. The index also remains higher than it was five years ago, when it was reported in May 2013 to be 84.5. This index has been edging off unusually strong readings earlier in the year, gains triggered by this year’s tax cut.

The expectations component, now at 89.5, offset a slight dip in the assessment of current conditions, at 113.3.

Eight out of every 10 consumers surveyed by the University of Michigan expect the Federal Reserve to raise interest rates in the year ahead, according to chief economist Richard Curtin.

“The data will thus provide some additional points for both sides in the debate about the timing and number of future interest rate hikes,” Curtin said.

Curtin went on to explain that consumers “have a remarkable track record” for identifying whether the actual unemployment rate will increase or decrease in the coming years.

The May result found that “fewer consumers anticipated further declines in the unemployment rate,” CNBC cited Curtin as saying.

The survey measures 600 households’ attitudes on future economic prospects, in areas such as personal finances, inflation, unemployment, government policies and interest rates.

Consumer sentiment is directly related to the strength of consumer spending. Consumer confidence and consumer sentiment are two ways of talking about consumer attitudes.

Among economic reports, consumer sentiment refers to the Michigan survey while consumer confidence refers to The Conference Board’s survey.

Consumer sentiment is mainly affected by inflation and employment conditions. However, consumers are also impacted by current events such as bear & bull markets, geopolitical events such as war and terrorist attacks. Investors monitor consumer sentiment because it tends to have an impact on consumer spending over the long run [although not necessarily on a monthly basis.

(Newsmax wire services contributed to this report).

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