ANN ARBOR—In the first half of 2015 consumers voiced the largest and most sustained increase in economic optimism since 2004, according to the University of Michigan (U-M) Surveys of Consumers. Conducted by the U-M Institute for Social Research (ISR) since 1946, the Surveys monitor consumer attitudes and expectations. The data are available non-exclusively via Bloomberg.
Just as important, that same record was set by households in the top third of the income distribution as well as by those in the middle and bottom thirds, according to U-M economist Richard Curtin, who directs the Surveys.
Moreover, the recent surveys recorded those same records when consumers were asked to evaluate prospects for the national economy, their personal finances, and buying conditions. Consumer spending will remain the driving force of economic growth in 2015. Overall, the data indicate growth in consumer spending of 3.0 percent in 2015.
“The remarkably favorable economic assessments documented in the recent surveys were due to two factors,” said Curtin. “An improving economy was the most important component. But the gains were so outsized that they probably reflected the acceptance of a new lower comparison standard that was based on diminished expectations for long-term economic prospects. Parsing just how much has been due to an improving economy and how much to an acceptance of diminished economic standards will be revealed by their subsequent consumption behavior. Needless to say, the answer to this question has critical implications for appropriate economic policies.”
Strong Economic Growth Expected
The economic slowdown has ended according to consumers. The fewest consumers thought the economy had worsened in the June 2015 survey than at any time since August of 2000. Consumers reported hearing of fewer recent job losses in June, and the majority of consumers anticipated good times in the economy as a whole during the year ahead. When averaged over the first half of 2015, consumers were more likely to expect good times in the economy than in the first half of any other year since 2000.
Personal Finances Improve
During the first six months of 2015, consumers more favorably assessed their current finances as well as their future financial prospects than in the first half of any other year since 2007. These very favorable expectations were driven by remarkably low income expectations: across all households during the first half of 2015, an income increase of 1.5 percent was expected, down from 2.5 percent in the first half of 2007. A lower prevailing inflation rate, however, made real income gains higher in the first half of 2015 than at any time since the first half of 2007.
Consumer Sentiment Index
The Sentiment Index was 96.1 in the June 2015 survey, up from 90.7 in May and significantly above last June’s 82.5. Other than January’s 98.1, the June reading is the highest since 2007. The Current Conditions Index was 108.9 in June, up from 100.8 in May and last June’s 96.6. The Expectations Index rose to 87.8 in the June 2015 survey, up from 84.2 in May and substantially above last June’s 73.5.
About the Surveys
The Surveys of Consumers is a rotating panel survey based on a nationally representative sample that gives each household in the coterminous U.S. an equal probability of being selected. Interviews are conducted throughout the month by telephone. The minimum monthly change required for significance at the 95 percent level in the Sentiment Index is 4.8 points; for Current and Expectations Indices the minimum is 6.0 points.
Surveys of Consumers, 734-763-5224