September consumer confidence: Consumer expectations remain positive

September 30, 2016

ANN ARBOR—Consumers became a bit more optimistic about prospects for the economy as well as their own personal finances in September, according to the University of Michigan (U-M) Surveys of Consumers.

Surveys of ConsumersConsumer sentiment has remained at high levels throughout the past year, with only small month-to-month variations, according to U-M economist Richard Curtin, who directs the Surveys. Rising incomes and declines in food and fuel prices were responsible for the recent confidence gains.

Buying plans edged downward in September due to the fewest mentions by consumers of attractive pricing on vehicles and homes in the past decade, according to Curtin. This has increased the emphasis that consumers placed on low interest rates when considering a home or vehicle purchase. The strength in personal finances as well as low interest rates will maintain the growth in real consumption at 2.7 percent through mid-2017.

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.

“The robust level of consumer spending has offset declines in business investment expenditures over the last three quarters and has kept the economy out of recession,” Curtin said. “The continuing strength in consumer demand is due to low unemployment and rising wages as well as low inflation and low interest rates. To keep confidence at high levels, future gains in real incomes and jobs must be sufficient to offset the anticipated impact of higher interest rates on consumer spending. The now dominant role played by interest rates is reflected by consumers’ more frequent references to interest rates rather than prices when asked to explain their views about buying conditions.”

Outlook for Personal Finances Improves

When asked about their financial prospects for the year ahead, consumers were more upbeat due to larger anticipated income gains as well as lower food and fuel prices. Just 10 percent of all households expected their financial situation would worsen during the year ahead in the September survey, unchanged from the past two months. Households anticipated annual income gains of 1.7 percent, up from August’s 1.2 percent and last September’s 1.0 percent.

Buying Depends on Low Rates

Buying plans have increasingly depended on low interest rates as perceptions of attractive prices have reached record lows. Just 20 percent cited attractively low vehicle prices in September; the last time that same low was recorded was sixteen years ago, and the last time a smaller proportion was recorded was over thirty years ago. Low home prices were cited by just 26 percent in five of the last six months; it has been ten years since a lower proportion was recorded. More households cited low interest rates rather than low prices for their positive buying attitudes.

Consumer Sentiment Index

The Sentiment Index was 91.2 in the September 2016 survey, up from 89.8 in August and 87.2 last September. All of the September gain was in the Expectations Index, which rose to 82.7, up from last month’s 78.7 and last year’s 87.2, but remained below the 2016 high of 84.9. The Current Conditions Index declined to 104.2 in September from 107.0 in August but remained above last September’s 101.2.

About the Surveys

The Survey 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.


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Surveys of Consumers, 734-763-5224,

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