Tag: University of Michigan Consumer Sentiment

Monday Economic Report – February 18, 2014

Here is the summary for this week’s Monday Economic Report:

A perfectly timed winter storm at the end of last week coincided with news that cold weather has had a negative impact on consumer spending and manufacturing output. Manufacturing production declined 0.8 percent in January, ending five straight months of expanding activity. Poor weather conditions closed some facilities and hampered shipments. Capacity utilization also decreased, down from 76.7 percent in December to 76.0 percent in January. That was the lowest utilization level since July. Yet, to the extent that weather contributed to the fall in manufacturing output, I would expect production to rebound in the coming months. After all, manufacturing production increased 3.0 percent in the second half of 2013, and manufacturers continue to be mostly upbeat about demand for 2014.

Nonetheless, we saw the effects of the weather in other indicators released last week as well. Retail sales fell 0.4 percent in January, extending December’s 0.1 percent decline. Reduced auto sales were a major factor in this decrease, with motor vehicle purchases down 1.8 percent in December and 2.1 percent in January. If you exclude autos from the analysis, retail spending was unchanged.

Although the University of Michigan and Thomson Reuters consumer sentiment measure was unchanged in February, respondents’ view of the current economy has slipped since December. One might surmise that weather impacted labor markets and incomes, lessening current confidence. However, Americans seem more optimistic about the future, with the expectations component rising from 71.2 in January to 73.0 in February.

There were signs that the U.S. economy’s recent improvements continue to bear fruit. Small business leaders have become more confident, with the National Federation of Independent Business’s Small Business Optimism Index edging higher for the third straight month, and January’s data also show an increased willingness to add workers. The net percentage planning to hire in the next three months rose to its highest level since September 2007. Along those lines, the number of manufacturing job postings increased from 283,000 in November to 297,000 in December. We have seen job openings in the sector recover from weaknesses midyear in 2013. Nonetheless, manufacturing net hires eased in December, and there was notable softness in the larger economy, both for new hires and job openings.

This week, we will get new numbers for the housing market and the latest data on manufacturing activity from a number of sources, including surveys from the New York and Philadelphia Federal Reserve Banks and Markit. The latter will report Flash Purchasing Managers’ Index (PMI) findings for the United States, China and the Eurozone. We will be looking for further evidence on the impact weather has had for manufacturers in the United States and for signs of improvement overseas. The Chinese PMI data had contracted in January’s report, but with output continuing to grow modestly. (For more information on worldwide trends, see the Global Manufacturing Economic Update, which was released on Friday.) Other highlights for the week include the latest data on consumer and producer prices, leading indicators and existing home sales.

Chad Moutray is the chief economist, National Association of Manufacturers.

retail sales - feb2014

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University of Michigan: Consumer Confidence Ebbed Slightly to Begin 2014

The University of Michigan and Thomson Reuters noted that consumer confidence ebbed slightly to begin the new year. The Consumer Sentiment Survey’s overall index dropped from 82.5 in December to 80.4 in January, according to preliminary data. (Note that final data for the month will be released on January 31.) The expectation had been for consumer attitudes to extend the gains made in December, with Americans recovering from the more-pessimistic tone observed surrounding the partial government shutdown.

This suggests that the public remains somewhat anxious about economic conditions, with easing noted in the measures both for the current environment (down from 98.6 to 95.2) and for future expectations (down from 72.1 to 70.9). Nonetheless, the data also indicate that consumers were more upbeat to begin 2014 than they were at the start of 2013. In January 2013, consumer sentiment was just 73.8, with both individuals and businesses continuing to be downbeat in the aftermath of the fiscal cliff debate.

Chad Moutray is the chief economist, National Association of Manufacturers.

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University of Michigan: Consumer Confidence Falls to its Lowest Point since April

After reaching a six-year high in July, consumer confidence has fallen for the second straight month, according to the University of Michigan and Thomson Reuters. The Consumer Sentiment Survey’s index declined from 85.1 in July to 82.1 in August to 76.8 in September. Note that this is preliminary figure, with a final index number released on Friday, September 27. Nonetheless, it highlights the fact that these types of surveys tend to react to pocketbook issues, and as such, higher gasoline prices and interest rates have resulted in a moderate decline in overall confidence. Slower job growth might also be a factor.

While measures for current and future economic conditions both declined in September, it was the expectations component that declined the most, down from 73.7 to 67.2 for the month. The index for current economic conditions decreased less dramatically, down from 95.2 to 91.8.

It is hard to know exactly what the survey respondents were thinking when answering these questions, but the forward-looking measure has now fallen for the third straight month. In addition to the economic headwinds mentioned earlier, the possibility of fiscal policy confrontations might also be on their minds. Moreover, respondents were more than likely completing this survey with geopolitical uncertainties mounting in Egypt and Syria.

Of course, the real importance of looking at consumer perceptions is the linkage that that may or may not have with consumer spending. With consumption accounting for roughly 70 percent of real GDP, spending is a major key to economic growth. Nonetheless, how consumers respond to surveys is not always correlated with purchasing behavior.

In this case, we learned earlier this morning that consumers did slow their purchases in August, with retail sales numbers up just 0.2 percent. While businesses are somewhat optimistic about higher demand over the coming months, we will closely watch both sentiment and spending numbers moving forward for clues about changes in that outlook. For now, let’s hope that the downturn in confidence is just a pause, as we had seen sentiment rising earlier in the year.

Chad Moutray is the chief economist, National Association of Manufacturers.

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University of Michigan: Consumer Confidence Jumps to a Six-Year High

Consumer confidence increased to a six-year high in July, according to the University of Michigan and Thomson Reuters. The Consumer Sentiment Survey had originally been estimated to decline slightly in preliminary figures, but instead, the final report suggests a gain of 1.0 point. The overall index rose from 84.1 in June to 85.1 in July, its highest level since July 2007. In general, we have seen Americans become more confident in the economy, with the index improving from the 72.9 reading of December.

The progress in sentiment has occurred in the views of both the current and expected future economic environment. In the July data, the index for current conditions rose from 93.8 to 98.6, and the average for the past three months has been 96.8. This compares to the average of 88.7 in the first four months of 2013, and indicates a pickup in confidence more recently. Similarly, the public has also become more optimistic about the future, with the average in the forward-looking component rising from 68.9 in the first four months and 76.7 since then.

Surveys such as this one tend to react to pocketbook issues. The improvements so far in 2013 can largely be attributed to rising home and equity values, which have allowed Americans to feel a little wealthier, and at the same time, we have seen modest gains in incomes. Earlier this year, confidence measures were impacted by higher payroll taxes and persistent headwinds in the domestic and global economy. While those have not gone away, they have simply been counteracted by the larger positive forces in the macro environment. Still, Americans are also keenly aware of the challenges, too, including elevated unemployment rates and frustrations with slow growth.

Moving forward, it will be interesting to see how higher interest rates and gasoline prices impact consumer sentiment. History tells us that they tend to be a drag on confidence. In the end, though, the value in these types of surveys is in how they predict consumer behavior, and so far, we have seen modest gains in consumer spending, helping to lift output figures.

Chad Moutray is the chief economist, National Association of Manufacturers.

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Monday Economic Report – July 15, 2013

Here is a summary of this week’s Monday Economic Report:

Federal Reserve Chairman Ben Bernanke made news last week in a speech before the National Bureau of Economic Research. He said that monetary policy would stay highly accommodative “for the foreseeable future.” Financial markets soared on this news, but long-term interest rates have already moved steadily higher since the last Federal Open Market Committee (FOMC) meeting, where it was suggested that a “tapering” of asset purchases might be possible later this year. For instance, Freddie Mac reports that 30-year mortgage rates have risen from 3.35 percent at the beginning of May to 3.91 percent at the start of June to 4.51 percent last week. Not surprisingly, this has led to a decline in mortgage applications in June, which could impact housing starts and permits data out this Wednesday.

Meanwhile, the cost of petroleum has skyrocketed over the past few weeks, with political instability in Egypt and reduced supplies in the United States sending prices higher. As recently as June 21, the spot price of West Texas Intermediate crude was $93.81 per barrel, but on Friday, it closed at $106.17 a barrel. This will lead to higher gasoline prices at the pump, which could zap some optimism we have seen recently. The University of Michigan’s July consumer sentiment numbers edged slightly lower than what we saw in June, but the data generally suggest that Americans are more positive now than earlier this year. Higher energy costs could also accelerate inflationary pressures, which have been mostly in check for much of the year. Even before the recent run-up in crude oil costs, the Producer Price Index rose 0.8 percent in June, largely on increased energy prices. Producer prices have been modest over the past year, up just 1.4 percent. If the current oil prices are sustained, look for pricing pressures to accelerate.

Two manufacturing surveys released last week echoed other studies, which have found some recent progress in the sector regarding new orders and production. Yet, both the California Manufacturing Survey from Chapman University and the Business Outlook Survey from the Manufacturers Alliance for Productivity and Innovation (MAPI) also noted some persistent weaknesses. Respondents in California still had a high degree of caution moving forward, and hiring plans were less positive than other indicators. At the same time, MAPI’s analysis noted shrinking export sales, with weaker global demand dampening enthusiasm for foreign investment as well. Worldwide manufacturing activity has grown very slowly in the past month, according to the most recent Global Manufacturing Economic Update, with Europe’s recession and a deceleration of growth in China hurting exports.

This week, we will see if recent improvements in manufacturing activity—modest as they might be—continue, or if the slowing global environment hurts sales and production figures. The New York and Philadelphia Federal Reserve Banks will release their latest surveys. Both had shifted from a slight contraction to modest growth in last month’s reports. In addition, the Federal Reserve Board is expected to show a slight gain in industrial production in June, after being unchanged in May. Overall, manufacturing production has grown just 1.7 percent over the course of the past 12 months, a figure that is subpar and that we hope picks up in the coming months. Other key data releases out this week include the Consumer Price Index, leading economic indicators, new residential construction, retail sales and state employment.

Chad Moutray is the chief economist, National Association of Manufacturers.

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Conference Board: Consumer Confidence Moves Higher in April

The Consumer Confidence Index from the Conference Board rose from 61.9 in March to 68.1 in April. This brings the index essentially back to where it was in February, when it stood at 68.0, but it is below the 73.1 reading observed in October. In short, sentiment appears to have improved of late, even as it is not quite where we would like for it to be. This is largely consistent with a similar survey from the University of Michigan and Thomson Reuters, which was released last week.

Noting this month’s improvement, Lynn Franco, the Director of Economic Indicators at the Conference Board, cautioned that “… consumers’ confidence has been challenged several times over the past few months by such events as the fiscal cliff, the payroll tax hike and the sequester. Thus, while expectations appear to have bounced back, it is too soon to tell if confidence is actually on the mend.”

Specifically, the Conference Board noted that opinions about the current and future economy have advanced in April, with the largest gain seen in the forward-looking measure. The expectations component of the index rose from 63.7 to 73.3 for the month, above the level seen in February (72.4). With that said, Americans remain largely frustrated with the labor market, with a net increase in the percentage of those who feel that jobs are hard to get.

The importance of these types of surveys, of course, is how they translate into consumer spending patterns. Yesterday, we learned that retail sales growth eased in March, with higher payroll taxes and persistent anxieties slowing purchases. The Conference Board’s survey found that some of this uneasiness continued into its respondents’ buying plans. The percentage of those planning to purchase autos and appliances were down slightly; whereas, home buying intentions were unchanged.

Chad Moutray is the chief economist, National Association of Manufacturers.

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Consumer Confidence Moves Higher in February, but Remains Sub-Par

The University of Michigan and Thomson Reuters report that consumer confidence moved higher from 73.8 in January to 76.8 in February. This was the second consecutive monthly gain, with the Consumer Sentiment Survey index plummeting post-election from 82.7 in November to 72.9 in December on fiscal cliff worries. Americans remained downbeat in January, with many of them reacting negatively to higher payroll taxes.

Perceptions about the current and future economic environment improved for the month. The index for present conditions rose from 85.0 to 88.0 for the month; whereas, the forward-looking index increased from 66.6 to 68.7. Even with February’s higher numbers, sentiment remains sub-par. Americans remain less positive than they were in November (which had been a 5-year high) and well below an ideal index value of closer to 100. The simple truth is that confidence has been more subdued because of slowly advancing economic growth, elevated unemployment rates, higher taxes, and other pocketbook issues.

Inflationary expectations in the University of Michigan survey remain modest. Consumers expect prices to rise 3.3 percent over the next 12 months, the same pace as was predicted last month but up from the 3.1 percent rate predicted in November.

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University of Michigan Consumer Confidence Dips Lower Again in January

The University of Michigan and Thomson Reuters report that consumer confidence dropped from 72.9 in December to 71.3 in January. This follows the steep fall in December – after the election and leading up to the tense fiscal cliff negotiations – from 82.7 in November.

Sentiment about both the current and future economy dipped, with the largest decline related to the present environment. The index for present conditions dropped from 87.0 to 84.8; whereas, the forward-looking measure fell from 63.8 to 62.7.

In addition to frustrations related to the political process, consumer reactions to reduced paychecks as a result of the expiration of the payroll tax holiday could partially explain this decrease. The worry would be that lower consumer sentiment could lead to reductions in spending, and to the extent that this is related to less disposable income, that might be expected. So far we have not seen these declines, as retail sales were reported to have increased 0.5 percent in December.

Inflationary expectations in the University of Michigan survey remain modest, but did pick up slightly in December. Consumers expected prices to rise 3.4 percent over the next 12 months, up from 3.3 percent from December and 3.1 percent in November.

Chad Moutray is chief economist, National Association of Manufacturers.

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University of Michigan Consumer Confidence Falls in December

The University of Michigan and Thomson Reuters report that consumer confidence fell from 82.7 in November to 74.5 in December. After rising from July (72.3) through November, December’s reading marks a reversal on higher sentiment. This is largely due to worries about the fiscal cliff, as consumers are beginning to focus on its possibility more than in previous months.

While Americans’ perceptions about the current and future economic environment were both downgraded, it was the expectations component that declined by more. The forward-looking sub-index plunged from 77.6 to 64.6, or its lowest level since December 2011. The measure of current conditions decreased from 90.7 to 89.9, or more moderately.

This shift in sentiment is important, as consumer spending has been one of the main drivers of the economy this year. In fact, consumer spending added about one percentage point to the real GDP growth rate of 2.7  percent in the third quarter, with the bulk of that (0.82 percentage points) from the purchase of durable and nondurable goods. A worried consumer might pull back their spending, with major implications for the larger macroeconomy. Already, we have seen businesses decrease their investments and slow hiring – as noted in yesterday’s NAM/IndustryWeek survey and elsewhere. In fact, capital spending was a drag on real GDP in the third quarter, a trend that should continue into the current one.

Inflationary expectations in the University of Michigan survey remain modest, but did pick up slightly in December. Consumers expected prices to rise 3.3 percent over the next 12 months, up from 3.1 percent from November.

Chad Moutray is chief economist, National Association of Manufacturers.

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University of Michigan: Consumers More Optimistic in October

The University of Michigan and Thomson Reuters said that consumer sentiment rose from 78.3 in September to 83.1 in October, its highest level since late 2007. This was the third consecutive monthly increase, haven risen from 72.3 in July. The measure had been expected to decline somewhat, so this result reflects increased optimism among the pubic. Given the many headwinds facing the economy right now, and with a possible fiscal cliff looming, this might be surprising.

Yet, this report is consistent with a similar one from the Conference Board a couple weeks ago, which reported Americans more cautiously upbeat about the future. Indeed, while component assessing the current economic environment also improved, the primary driver of this month’s gain was the improved expected perceptions of the coming months.

Again, this might seem counterintuitive, especially for those of us who are more concerned about the consequences of the fiscal cliff or the slowing of the global economy. But, these types of indicators often are a snapshot of feelings right now, and it might also be the case that the public does not feel that the threats from the “cliff” are as real as they are political. That disconnect is one that will be discussed more and more as we approach the end of the year, with policymakers attempting to avert the crisis.  

Chad Moutray is chief economist, National Association of Manufacturers.

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