ANN ARBOR—Consumer confidence improved in February due to more positive signs of expanding employment, according to University of Michigan economist Richard Curtin, director of the Thomson Reuters/University of Michigan Surveys of Consumers.
The surveys, conducted by the U-M Institute for Social Research, have been monitoring consumer attitudes and expectations for more than 60 years.
“Expected job gains have partially offset concerns about higher payroll taxes and the impending reduction in federal spending,” Curtin said. “Unfortunately, those expected job gains will be harder to actually accomplish given that the economy faces weakened consumer demand due to lower take-home pay as well as reduced federal spending and employment. View and download the chart and table (Excel files).
“Consumers find the political blame-game for policy inaction a very unsatisfactory substitute for a compromise that could improve economic conditions in the near term as well as over the longer term.”
When consumers were asked to describe in their own words what economic developments they had recently heard, net job gains were much more commonly reported in February than any time since last May. The improvement in job prospects was due to a slight uptick in prospects for the national economy.
“Consumer confidence continued to improve in February due to expected gains in employment. These expected job gains have partially offset concerns about higher payroll taxes and the impending reduction in federal spending. Unfortunately, those expected job gains will be harder to actually accomplish given that the economy faces weakened consumer demand due to lower take-home pay as well as reduced federal spending and employment. Consumers find the political blame-game for policy inaction a very unsatisfactory substitute for a compromise that could improve economic conditions in the near term as well as over the longer term.”
Consumers are still dismayed about the state of government economic policies, with one-in-four spontaneously mentioning some negative aspect, Curtin says. Overall confidence in government economic policies remained near its all-time low, with just 15 percent of consumers saying that the Obama administration and Congress were doing a good job.
Expected Income Growth Troublesome
The persistent gloom expressed by consumers involves their evaluations of their personal finances. Less than a third of all households expected their finances to improve during the year ahead. Half of all households did not anticipate any increase in their incomes during the year ahead in February as they have in all but two monthly surveys over the past four years. Although inflation has remained low, half of all households expected declines in their inflation-adjusted incomes during the year ahead.
Interest-Sensitive Purchases Expected to Improve
Sales of interest-sensitive goods such as homes and vehicles will continue to rise during the year ahead, especially among upper income households. The housing market continues to benefit from anticipated gains in future home prices. Indeed, homeowners reported in the February 2013 survey the most favorable expected annual trends in home values since late 2007.
Consumer Sentiment Index
The Sentiment Index was 77.6 in the February 2013 survey, up from 73.8 in January and above last February’s reading of 75.3. The Expectations Index was 70.2 in February, up from 66.6 in January and nearly identical to last year’s 70.3. The Current Economic Conditions Index rose to 89.0 in February, up from 85.0 in January and 83.0 in last February’s survey.
About the survey
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% level in the Sentiment Index is 4.8 points; for Current and Expectations Index the minimum is 6.0 points. For more information, visit the Surveys of Consumers website at http://new.sca.isr.umich.edu.
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