US Consumer Sentiment Hit a 14 Year High According to UofM Survey

Talking Points:

• Sentiment index rose to 102 in March from 99.7 versus an estimated 99.3
• Tariffs and tax cuts received mentions in the survey, affecting future expectations
• 59% of respondents cited financial progress, the most since the record began in 1946

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The University of Michigan released its consumer sentiment report for March, furthering the swell in optimism the series has tracked. The survey rose to 102 from 99.7 the month previous and beat estimates for a modest slip to 99.3. This marks the highest reading from the index since 2004. The current conditions gauge measuring Americans’ perceptions of their finances rose to 122.8 from 114.9, a strong beat and the highest value since the metric began in 1946. Yet, not all the figures were roaring higher. The forward-looking index of consumer expectations dropped to 88.6 from 90 but remains positive year over year.

The University of Michigan attributed the general enthusiasm to lower earning households feeling more optimistic about the economy. Respondents in the bottom third of household income revealed a 15.7 point net gain while the top third showed a drop of 7.3 points. While the bottom third of respondents felt quite positive, the top third indicated falling income and rising inflation expectations weighed on their outlook. Tariffs on imported steel and aluminum earned mentions in the survey according to the report, adding to the difference in future expectations and current sentiment. Tax cuts were also still showing through with the share of respondents citing income gains rising to a 50 year high. Split between the increases in consumer sentiment and economic conditions, a drop in consumer expectations paints a divided picture for next month’s report.

Looking to the market’s response following the release of the statement, both the Dollar and US equities offered limited response – though the Greenback slipped slightly in early hours of trading and stocks advanced. There was little impact for EUR/USD as a heavy docket for next week – including the Fed rate decision, expected end to the tariff grace period and G20 meetings – pull the market’s focus further ahead. Should a trade war heat up and/or confidence in tax cuts turn into concerns over deficit building, the remarkable sentiment readings may eventually falter.