University of Michigan Consumer Sentiment Shows Broad Growth

Talking Points:

• Index of consumer sentiment rose to 95.8 on biggest increase since Dec 2013


• Lower incomes and younger households saw the largest recorded gains in sentiment


• Increased income gains and improved employment was cited as key driver in gains

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The University of Michigan’s survey of consumer confidence for May showed the strongest increase in sentiment in over two years. The headline index increased to 95.8 index points, 6.8 points higher than the prior month and 5.1 points higher than the previous year. The survey of current economic conditions increased to 108.6, an increase of 1.9 index points over the previous month to the highest level for the component since June of last year and 0.7 points off a nine-year high. The index of consumer expectations increased to 87.5 versus 77.6 in April for the largest point increase in the measure since September 2006.

The broad increases in consumer sentiment as shown in the survey indicate a sharp increase in confidence for the strength of the economy as well as income growth over the coming years. Despite the stronger monthly report, Inflation expectations have not increased compared to the year prior. Inflation expectations from the survey expect 2.5% inflation over the next year versus 2.8% in the month prior, which matches the softest price outlook since September of 2010. The survey cites more optimism for income gains and improved employment outlook, as key drivers behind the rebound in sentiment.

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