Courtesy of Doug Short.
The preliminary University of Michigan Consumer Sentiment for July came in at 81.3, a decline from the June final of 82.5 and the lowest reading since March. Today’s number came in below the Investing.com forecast of 83.0.
See the chart below for a long-term perspective on this widely watched indicator. I’ve highlighted recessions and included real GDP to help evaluate the correlation between the Michigan Consumer Sentiment Index and the broader economy.
To put today’s report into the larger historical context since its beginning in 1978, consumer sentiment is now 4 percent below the average reading (arithmetic mean) and 3 percent below the geometric mean. The current index level is at the 37th percentile of the 439 monthly data points in this series.
The Michigan average since its inception is 85.1. During non-recessionary years the average is 87.4. The average during the five recessions is 69.3. So the latest sentiment number puts us 12.0 points above the average recession mindset and 6.1 points below the non-recession average.
Note that this indicator is somewhat volatile with a 3.1 point absolute average monthly change. The latest 1.2 point change is relatively small. For a visual sense of the volatility, here is a chart with the monthly data and a three-month moving average.
For the sake of comparison, here is a chart of the Conference Board’s Consumer Confidence Index (monthly update here). The Conference Board Index is the more volatile of the two, but the broad pattern and general trends have been remarkably similar to the Michigan Index.
And finally, the prevailing mood of the Michigan survey is also similar to the mood of small business owners, as captured by the NFIB Business Optimism Index (monthly update here).
The general trend in sentiment since the Financial Crisis lows has been one of slow improvement. However, it has been range bound since 2012, hovering between 72 and 85. It is currently a bit above the mid-point of the range.
