October 11, 2019

The preliminary estimate of consumer sentiment for October rose by 2.8 points to 96.0 after having risen 3.4 points in September.  While volatile on a month-to-month basis consumer sentiment remains at a lofty level.  The peak for the cycle was 101.4 in March of last year.  It is not far below that level currently.

Surveys of Consumers Chief Economist Richard Curtin said, “Sentiment rebounded in early October as consumers anticipated larger income gains and lower inflation during the year ahead. As a result, real income expectations rose to their most favorable level in two decades. Stronger finances and lower interest rates helped to modestly bolster buying plans. These favorable trends did not change consumers’ overall prospects for the national economy. A slower pace of overall economic growth is still anticipated, including some modest increases in the national unemployment rate during the year ahead. While uncertainties about trade policies have continued to depress economic prospects, its negative impact has slightly lessened.. Importantly, the impeachment inquiry has not had a significant negative impact on economic prospects.

Our sense is confidence will continue to be relatively elevated in the months ahead.  The stock market is once again near a record high level.  The Fed may cut rates a third time at the end of this month.   Bond yields are near a record low level.  Mortgage rates have fallen from 4.9% to 3.6%.  The economy is cranking out 150 thousand jobs per  month.  Disposable income is growing at a solid 4.5% pace.  And consumer debt levels in relation to income are near a record low level.

We expect GDP growth of 2.5% in 2019 and 2.4% in 2020 versus 2.5% last year.  We expect the economic speed limit to be raised from 1.8% to 2.5% within a few years.  That will accelerate growth in our standard of living.

The increase in consumer sentiment in September was attributable to both the expectations and current conditions components.

Consumer expectations for six months from now increased from 83.4 to 84.8.

Consumers’ assessment of current conditions jumped from 108.5 to 113.4

Trends in the Conference Board measure of consumer confidence and the University of Michigan series on sentiment move in tandem, but there are often month-to-month fluctuations.  Both series remain at levels that are consistent with steady growth in consumer spending at a reasonable clip of about 2.5% in 2020.

Stephen Slifer

NumberNomics

Charleston, SC