Consumers sentiment rose in early March to its highest level since 2004, according to the University of Michigan’s survey.
The jump in the University of Michigan’s index of consumer sentiment to 102 from 99.7 in February was due to a new all-time record in favorable assessments of current conditions. The best of times are here again.
The survey has a very populist twist. All of the gains in the index were due to improvements in the feelings of households with incomes in the bottom third. Households in the top third posted a significant monthly decline, mostly due to falling views of the outlook for the economy and their personal finances. This could be an indication of who expects to gain and who expects to lose from the Trump administration’s tax policies and its newfound aggressiveness on trade issues.
“In early March, favorable mentions of tax reform were offset by unfavorable references to the tariffs on steel and aluminum,” the survey’s chief economist, Richard Curtin, said in a statement.
There were some indications of rising inflation signals. Near-term inflation expectations jumped to their highest level in years, although this is somewhat offset by the fact that expected increase in incomes dropped.
“Among the top-third income households, income expectations fell more and inflation expectations rose more,” Curtin said.
As higher-income households account for more than half of all consumption spending, that could prove a drag on consumption, Curtin notes. This might explain some of the recent slowdown in consumer spending despite blowout employment numbers.