Consumers demonstrate resilience

September 29, 2017

Surveys of ConsumersANN ARBOR—Consumer sentiment slipped in September due to the expected impact of the hurricanes on the economy and on gas prices. Importantly, the impact was quite small and has already begun to fade, according to the University of Michigan Surveys of Consumers.

In the past year, there has been a long list of issues that could have derailed consumer confidence, including the unprecedented partisan divide, North Korea, Charlottesville, as well as the hurricanes, said U-M economist Richard Curtin, director of the surveys.

Confidence has nonetheless remained very favorable, moving sideward in a very narrow positive range. In the first nine months of 2017, the Sentiment Index averaged 96.2, just ahead of the 91.9 and 92.9 recorded in the prior two years, making 2017 the highest recorded since 2000.

“Recent trends have demonstrated a degree of resilience among consumers that has helped to stabilize economic confidence,” Curtin said. “The last time consumers showed this degree of resilience was in the last four years of the record 1990s expansion.

“Needless to say, resilience is an ineffable quality whose appearance or disappearance is difficult to predict in advance. While consumer resilience has lowered precautionary saving motives and increased willingness to spend and incur debt, those changes will still be constrained by slower income growth and consumers who are still more risk averse. Overall, consumer spending is expected to increase by 2.6 percent in 2017 and in the first half of 2018.”

Favorable Personal Finances

For the fourth consecutive month, half of all consumers reported in the September survey that their finances had improved. When asked to explain how their finances had improved, nearly one in four households mentioned net income increases, four times higher than last year’s 6 percent. Income gains were particularly strong among those under age 45, reported by 43 percent of those in this age group.

Just one in 12 households in the September 2017 survey anticipated that their financial situation would worsen in the year ahead. Six in 10 households anticipated their incomes would increase during the year ahead, with one in three anticipating gains of 5 percent or more.

Rising Home Prices Drive Wedge Between Buying and Selling Homes

Two-thirds of all homeowners reported that their home had recently increased in value, the highest proportion in 10 years. Rising home prices meant that the fewest consumers in five years judged home-buying conditions favorably in September, while those same price increases meant that selling conditions were viewed more favorably in the past three months than at any other time since 2005. Importantly, home price increases should increasingly add to the supply of homes for sale in the year ahead, which has recently been a constraint on increasing in home sales.

About the Surveys

The Consumer Sentiment Index was 95.1 in the September 2017 survey, between last month’s 96.8 and last year’s 91.2. The Current Conditions Index was 111.7 in the September survey, just above August’s 110.9 and well above last September’s 104.2. The Expectations Index fell to 84.4 in September, between last month’s 87.7 and last year’s 82.7.

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 points.

Surveys of Consumers

U-M Institute for Social Research


Morgan Sherburne, [email protected], 734-647-1844

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