The preliminary University of Michigan Consumer Sentiment Index for February reached its second-highest level since 2004 in the first half of the month despite the carnage in the equities market that occurred during the same two weeks. Only 6% of consumers event mentioned stock market volatility as a factor in their responses.

What did influence the results was government policy. More than a third of respondents (35%) favorably cited government policy, the highest level in more than 50 years.

The preliminary results for the February index jumped from a final January reading of 95.7 to a February reading of 99.9, a 4.4% month-over-month increase.  Economists polled by Bloomberg were expecting a first February reading of 95.5.

The month-over-month consumer expectations subindex rose from 86.3 to 90.2 (up 4.5%) and the current conditions subindex rose from 110.5 to 115.1 (up 4.2%).

Year over year, the consumer sentiment index is up 3.7%, the current conditions subindex is up 3.2% and the consumer expectations subindex is up 4.3%.

The survey’s chief economist, Richard Curtin, said:

[H]igher interest rates during the year ahead were expected by the highest proportion of consumers since August 2005. Consumers also anticipated a slightly higher inflation rate, although the year-ahead inflation rate has remained relatively low and unchanged for the past three months. Purchase plans have been transformed from the attraction of deeply discounted prices and interest rates that outweighed economic uncertainty, to being based on a sense of greater income and job security as the fewest consumers in decades mentioned the favorable impact of low prices and interest rates. Overall, the data signal an expected gain of 2.9% in real personal consumption expenditures during 2018.

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