University of Michigan consumer sentiment index drops in early September

The preliminary index of University of Michigan consumer sentiment dropped in early September owing to the worries about the outlook for the national economy. The consumer confidence index fell to 95.3 in September from August’s print of 96.8. On a sequential basis, the index has dropped 1.5 percent, while on a year-on-year basis, the index rose 4.5 percent.

However, consumers’ assessments of current economic conditions rebounded. The Current Conditions Index reached 113.9 in September, the highest level since November 2009, rising from August’s 110.9.

The two hurricanes that hit the nation had a huge impact on expected economic conditions. Throughout all the interviews conducted in early September, 9 percent instinctively mentioned concerns that Harvey, Irma or both would have a negative effect on the overall economy. Among those who mentioned the hurricanes, the confidence index was 80.2, whereas the ones who did not spontaneously mention either hurricane, the sentiment index stayed unchanged from last month at 96.8.

With the broad-based devastation in Texas and Florida, it is not surprising to find the negative initial reactions. It will not be surprising either if these negative assessments last longer than following most past hurricanes, stated Surveys of Consumers chief economist, Richard Curtin. While consumers have expected slight rises in gas prices and a slightly higher overall inflation rate, those concerns were neutralized by the best assessments of their financial situation in over a decade. Renewed rises in incomes and also rising home and equity values have acted to offset the negative effects from the hurricanes. Given the current resilience of consumers, recent events are not expected to derail sentiment, added Richard Curtin.

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