Consumer Sentiment Now Better in Lower Incomes vs. Higher Incomes

It was just this week that 24/7 Wall St. pointed out that Consumer Confidence from the Conference Board did not match up with the preliminary report from the University of Michigan’s Consumer Sentiment report. Now it turns out that the reports do not look so far out of whack after making the comparisons after the University of Michigan’s revision for its Consumer Sentiment report.

November’s Consumer Sentiment was revised to 91.3 after the preliminary view of 93.1. This is still higher than the 90.0 final reading for October, but the expectations and current conditions may leave some impact from the Paris terror attacks.

Current Conditions were shown as being 104.3 in November, versus 102.3 in October. The Index of Consumer Expectation was 82.8 in November, up from the 82.1 reading from October.

If you trust this small-sample survey’s accuracy, there may be more confidence among lower income households and less confidence in higher income households. Wednesday’s Consumer Sentiment revision was described as follows:

Although some of the gains recorded earlier in the month evaporated in late November, consumer confidence remained quite favorable, just below the average for the past six months 91.6. Other than for the past twelve months, the Sentiment Index was higher in November than any time since the start of 2007. Nonetheless, the data indicate that consumers have become increasingly aware of economic cross currents in the domestic as well as the global economy. Nearly all of the recent advance was focused on current conditions rather than future economic prospects, and the entire November gain was due to lower income households. Households with incomes in the top third of the distribution, who account for more than half of all spending, expressed a more cautious optimism. This more guarded outlook reflected somewhat weaker personal financial prospects and a greater insistence that their purchases will be contingent on the availability of discounted prices and reduced interest rates. To be sure, the resilience of consumers has steadied the course of the macroeconomy during the past few years. Overall, the data are consistent with growth in real personal consumption spending of 2.8 in 2016.

For a comparison of the revised Consumer Sentiment versus this week’s measurement of Consumer Confidence by the Conference Board, the Confidence report came in at a very disappointing 90.4 reading for November. October’s Confidence report was revised upward to 99.1. Expectations really hurt here also, falling 10 points to a roughly an 18 month low of 78.6; and the jobs component for expected job openings was weak as well.