Consumer sentiment surprises to downside

Key Concepts

• University of Michigan Consumer Sentiment Index
• Current Conditions Index
• Consumer Expectations Index
• One-Year Inflation Expectations
• 5-10 Year Inflation Expectations
• Data Collection Methodology (Cell Phone vs. Web Based)
• Historical Comparisons (1946, 1952, 1980, 1981, 1990, 1991, 2022)

University of Michigan Sentiment Index: Preliminary Reading

• The University of Michigan Consumer Sentiment Index preliminary reading came in at 50.8, significantly below expectations of 53.
• The index has been sequentially lower. The previous reading was 52.2.
• This is the second-lowest reading since June 2022 (50.0), going back to 1952.
• The data collection methodology changed in 2024 from cell phone-based to web-based, which may influence the results.

Current Conditions Index

• The Current Conditions Index is at 57.6, also below expectations of around 60.
• This is the weakest reading since June 2022.

Consumer Expectations Index

• The Consumer Expectations Index is at 46.5, lower than the previous 48.5.
• This reading is comparable to March 1980, when it was slightly above 44.

Inflation Expectations

• One-year inflation expectations are at 7.3%, equaling November 1981 levels. To find a higher number, you have to go back to April 1981.
• 5-10 year inflation expectations are at 4.6%, equaling January 1991 levels. A reading of 4.7 was recorded in September 1990.

Data Collection Methodology Change

• The University of Michigan changed its data collection method from cell phone-based to web-based in 2024.
• The speaker suggests that this change may have impacted the survey results.

Conclusion

The University of Michigan Consumer Sentiment Index shows a significant drop in consumer sentiment and rising inflation expectations. The speaker highlights the potential impact of the change in data collection methodology and encourages viewers to draw their own conclusions about the data. The numbers are described as "wild" and concerning, with inflation expectations reaching levels not seen since the early 1980s and early 1990s.