The University of Michigan’s Consumer Sentiment Index has been higher thus far in 2018 (98.5) than in any prior year since 2000, which was the last year of the longest expansion since the mid-1800s.
That’s according to Richard Curtin, chief economist of the University of Michigan’s consumer surveys.
But consumers aren’t immune to negative factors such as stock price declines, rising inflation and interest rates, and the negative mid-term election campaigns. The data only indicate that the tipping point toward escalating pessimism has not been reached. That’s because of the prevailing belief that the economy would produce robust job growth during the year ahead, even if overall wage growth remained dismal.
Consumers now place a higher value on job security compared with wage growth due to job losses in the Great Recession as well as the aging of the labor force, the survey finds.
Consumers’ reports have become more volatile and have exceeded actual job growth in recent years, whereas before 1980 consumers regularly underestimated the strength in the labor market. This may reflect the heightened attention accorded to every waver in job news in the current environment, while before 1980, job growth was the accepted norm and consumers were more sensitive to real wage growth.
The pace of growth in real personal consumption can be expected to average 2.6% during late 2018 and into the first half of 2019. Increases in home and vehicle prices, rising interest rates, and decreases in the pace of growth in inflation-adjusted incomes have especially dimmed prospects for home and vehicle sales.