Important points
The Michigan Consumer Confidence Index rose, ending September at 70.1, the highest level since April. Inflation expectations have fallen again as surveys show consumers are noticing a slowdown in inflation. Economists had expected a more modest rise in the Michigan survey. This is in contrast to this month’s similar consumer confidence survey, which fell due to labor unrest.
Consumer sentiment continued to rise in September, with consumers feeling positive about the containment of inflation.
Michigan’s Consumer Confidence Index ended September at 70.1, higher than preliminary readings from earlier this month and above the 69.3 expected by economists surveyed by The Wall Street Journal and Dow Jones Communications.
The closely watched survey showed improvements in all five categories, including an increase in economic expectations for the previous year, as the inflation-focused survey hit its highest level since April.
“While sentiment remains below historical averages due in part to dissatisfaction with high prices, consumers are well aware that inflation continues to slow.Consumer expectations for the economy are brightening; Sentiment seems to be gaining some momentum,” said Joan Hsu, director of consumer research.
Inflation expectations decline as price pressure eases
Of note is that the survey’s inflation expectations for the previous year fell for the fourth consecutive month to 2.7%. The Fed is pushing consumer pressure on inflation because officials have said that if price-setters and wage-payers believe prices are rising, they will act in ways that create that situation. I’m watching my expectations carefully.
This increase in consumer sentiment comes as the Federal Reserve began lowering interest rates as inflation cooled. Today’s data from the personal consumption expenditure (PCE) index, the Fed’s preferred inflation indicator, reaffirmed that inflation is slowing and raised the possibility of further rate cuts. Annual price inflation slowed to 2.2% in August, the lowest year-on-year rate in more than three years, according to the PCE index.
“Reducing interest rates will certainly provide some relief, especially for those who may benefit from a reduction in variable rate credit or be able to refinance higher fixed rate mortgages originated in previous years. That’s true for consumers who have a lot of debt,” Chief Jim Baird said. Head of Investments at Plante Moran Financial Advisors.
Michigan’s positive survey contrasts with the similar Conference Board’s Consumer Confidence Index, which is more sensitive to working conditions and has increased in recent years as people’s concerns about the job market begin to rise. It was the biggest decline in a year.
Mr Baird said: “Even though there are strong signs that inflation continues to ease, this does not alleviate the continued challenges posed by rising prices, as many households continue to feel the weight of rising costs of living.” .
