Originally published at The Boock Report
The UoM May consumer confidence index jumped to 102.4 from 97.2 in April and that was well better than the expected print of no change. This is the highest since January 2004. All of the confidence gain was in the Expectations component which jumped 8.6 pts. Current conditions were basically unchanged at 112.4 from 112.3. Of particular note, just when everyone thinks inflation expectations are dead, the one year outlook rose 2.8% from 2.5% in April and that’s the most since October 2018. I’d attribute the rise mostly to the jump in gasoline prices as it’s a price most people see every day. Those that expect higher gasoline prices rose to the most since last June.
University of Michigan Consumer Confidence
After falling 11 pts last month, the Net Income component bounced by 6 pts. At 28, it still is the 2nd highest level since last fall so wage gains are still pretty good. There was no change for the 3rd month in expectations for employment.
Notwithstanding the jump in confidence driven by expectations, spending intentions were mostly softer. Those that said it’s a good time to buy a house fell 4 pts to match the least since September 2008, notwithstanding lower mortgage rates and that’s because years of cheap money saw aggressive home price gains price many out of the market. Wanting to take advantage of those high prices, those that said it’s a good time to sell a home rose 2 pts to the most since March 2017 and is just 1 pt from matching a record high dating back to 1992 of data. Those that plan on buying a major household item fell by 5 pts to match the lowest since September 2015. Those that plan on buying a car/truck rose 2 pts but after falling by 2 pts in April.
Those That Said It's a Good Time to Buy a House
There was some commentary in the UoM release in talking about the recent tariff news as it coincided with the taking of this survey. Here are some key quotes, “To be sure, negative references to tariffs rose in the past week and are likely to rise further in late May and June. Those who held negative views about the impact of tariffs on the economy and pricing had values on the Expectations Index that were 25 points lower, and expected the year-ahead inflation rate to be 0.6 percentage points higher. Even apart from the direct impact of tariffs on prices, rising tariffs could cause a more general loss of confidence which could further diminish the pace of consumer spending. At present, the data point toward moderate spending growth in the year ahead. Nonetheless, the data indicate the corrosive impact of an escalating trade war.”
Bottom line, in light of everything going on out there today’s rise in confidence was impressive, notwithstanding it all being concentrated in just one of the top components. Either way, as stated here many times consumer confidence is never market moving because it’s only a coincident indicator and doesn’t indicate how consumers will behave from here, as seen in the spending conditions conflict with the headline confidence read.
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