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What you need to know
- The Michigan Consumer Sentiment Index reached 71.8 in November’s final reading. This is higher than the October reading but still lower than the initial reading taken just before the Presidential election.
- Although the survey of consumer options, which is widely watched, has shown an increase for the fourth straight month, economists had expected a higher reading in November.
- The consumer’s long-term perception of price pressures is also rising, but the near-term expectations are lower.
Although consumers’ sentiment improved, it wasn’t quite as large as expected.
The Michigan Consumer Sentiment Index in November was 71.8. This is an improvement from the reading for October, but below the preliminary reading of 73.0. Consumer surveys were completed just before Donald Trump’s election as president. The final reading also fell below the 73.5 forecast by The Wall Street Journal, Dow Jones Newswires and economists who were surveyed.
Joanne Hsu of Michigan Surveys of Consumers, the director of Michigan Surveys of Consumers, stated that the final result revealed a decrease in sentiment for some consumers following the election results.
“The expectations index surged for Republicans and fell for Democrats this month, a reflection of the two groups’ incongruous views of how Trump’s policies will influence the economy,” Hsu wrote.
The mood improves for the fourth consecutive month
In the four months leading up to the election on Nov. 5, consumer sentiment has generally improved. Sentiment can dip during presidential elections as voters worry about the future of the economy. But consumers usually feel better once the election results are announced. In November, the survey found that although consumers’ feelings about economic conditions were lower than they expected in November. However, they had higher expectations for economic growth.
“Broadly, consumers expect moderate improvement in the economy over the next six months, but there was a more nuanced shift in sentiment that tended to track with political affiliation and individual respondents’ view on the election’s outcome,” Jim Baird said Jim Baird Chief Investment Officer with Plante Moran Financial Advisors.
Inflation Expectations Adjust Ahead of Trump's Tariff Proposals
The survey showed that there was a shift in the perception of inflation. Many economists believe it will rise if Trump implements the tariffs he suggested during the election campaign. Federal Reserve officials closely track consumer inflation expectations, as they may influence the trajectory of prices.
Inflation expectations for the year ahead fell from 2.6% to 2.6% in February, a slight decrease compared to last month. But inflation expectations out to five years increased to 3.2 %, indicating a growing uncertainty regarding long-term price trends.
“While consumers recognize that inflation has receded significantly, there’s less certainty that the Fed’s ability to hold inflation near its 2% target over the long term,” Baird said.
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