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Michigan Consumer Sentiment Takes a Dive!

  • Written by Syndicated Publisher No Comments Comments
    May 17, 2015

    The University of Michigan preliminary Consumer Sentiment for May came in at 88.6, down from the 95.9 April final reading and well below the interim high of 98.1 in January. Investing.com had forecast 96.0 for the May preliminary.

    See the chart below for a long-term perspective on this widely watched indicator. Recessions and real GDP are included to help us evaluate the correlation between the Michigan Consumer Sentiment Index and the broader economy.

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    To put today’s report into the larger historical context since its beginning in 1978, consumer sentiment is now 4 percent above the average reading (arithmetic mean) and 5 percent above the geometric mean. The current index level is at the 51st percentile of the 449 monthly data points in this series.

    The Michigan average since its inception is 85.2. During non-recessionary years the average is 87.5. The average during the five recessions is 69.3. So the latest sentiment number puts us 19.3 points above the average recession mindset and 1.1 points above the non-recession average.

    Note that this indicator is somewhat volatile, with a 3.1 point absolute average monthly change. The latest data point was a 7.3 point change. For a visual sense of the volatility, here is a chart with the monthly data and a three-month moving average.

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    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.

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    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).

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    The general trend in the Michigan Sentiment Index since the Financial Crisis lows had been one of slow improvement. But the latest survey findings were quite disappointing.

    Images: Flickr (licence attribution)

    About The Author

    My original dshort.com website was launched in February 2005 using a domain name based on my real name, Doug Short. I’m a formerly retired first wave boomer with a Ph.D. in English from Duke. Now my website has been acquired byAdvisor Perspectives, where I have been appointed the Vice President of Research.

    My first career was a faculty position at North Carolina State University, where I achieved the rank of Full Professor in 1983. During the early ’80s I got hooked on academic uses of microcomputers for research and instruction. In 1983, I co-directed the Sixth International Conference on Computers and the Humanities. An IBM executive who attended the conference made me a job offer I couldn’t refuse.

    Thus began my new career as a Higher Education Consultant for IBM — an ambassador for Information Technology to major universities around the country. After 12 years with Big Blue, I grew tired of the constant travel and left for a series of IT management positions in the Research Triangle area of North Carolina. I concluded my IT career managing the group responsible for email and research databases at GlaxoSmithKline until my retirement in 2006.

    Contrary to what many visitors assume based on my last name, I’m not a bearish short seller. It’s true that some of my content has been a bit pessimistic in recent years. But I believe this is a result of economic realities and not a personal bias. For the record, my efforts to educate others about bear markets date from November 2007, as this Motley Fool article attests.
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