University of Michigan Surveys of Consumers

Consumer sentiment solidifies sharp gains

March 1, 2024

ANN ARBOR—Consumer sentiment was virtually unchanged in February, slipping just two index points and solidifying the large gains from December and January, according to the University of Michigan Surveys of Consumers.

Consumers continue to express more confidence about the economy than they did last fall, confirming the considerable improvements in December and January across various aspects of the economy, said U-M economist Joanne Hsu, director of the Surveys of Consumers.

Year-ahead expectations for business conditions reached its highest reading since July 2021. Sentiment is currently about 25% above November 2023 and about 9% below its historical average since monthly data collection began in 1978.

“The latest reading confirmed the remarkable improvement in consumers’ economic views that began in December 2023,” Hsu said. “As they did in January, consumers continue to feel assured that inflation will continue to slow down going forward, though many remain weighed down by prices that remain high.

“Many consumers are looking ahead to the upcoming election, but at this early juncture in the election cycle, political uncertainty has yet to weigh down sentiment at this time. Overall, consumers perceived few changes in the state of the economy since the start of the new year. “

Improvement in views from 2023 visible across political spectrum

The sharp increases in sentiment that began in December were visible across all three political groups, reflecting the broad-based perceptions of improvement in the trajectory of the economy, Hsu said.

Republicans are now 19 points above their November 2023 reading, followed by Independents with a 17-index-point improvement and Democrats lifting 11 points over this period. Still, partisan differences in sentiment remain.

“Consumers whose political party is in the White House tend to have higher levels of sentiment than those whose party is not, with Independents in the middle,” Hsu said. “Despite large partisan differences in consumer sentiment, Independents continue to be consistently in the middle and hold views that reflect national averages.”

Continued strength in personal finances

Consumers’ assessments of their personal finances slipped slightly from January but remained 24% above October 2023. According to Hsu, consumers are now feeling the effects of strong labor markets more personally—one-third reported that their finances have improved due to strong incomes, the highest since May 2022 and up from about 25% last October.

Meanwhile, the share of consumers blaming high prices for eroding their living standards dipped to 35%, the lowest since February 2022. These patterns reflect the fact that consumers are feeling greater confidence than they did last year about their financial circumstances on a number of dimensions, Hsu said.

Consumer Sentiment Index

The Consumer Sentiment Index fell to 76.9 in the February 2024 survey, down from 79.0 in January and above last February’s 66.9. The Current Index fell to 79.4, down from 81.9 in January and above last February’s 70.7. The Expectations Index fell to 75.2, down from 77.1 in January and above last February’s 64.5.

About the surveys

The Surveys of Consumers is a rotating panel survey at the University of Michigan Institute for Social Research. It is 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 phone. The minimum monthly change required for significance at the 95% level in the Sentiment Index is 4.8 points; for the Current and Expectations Index, the minimum is 6 points.

Contact: Morgan Sherburne, [email protected]

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