Michigan Consumer Sentiment: June Final Beats Expectations

by: Doug Short

The University of Michigan Consumer Sentiment final number for June came in at 84.1, up from the 82.7 preliminary reading. Today's number came in above the Investing.com forecast of 82.8. However, today's number is a tad below the May final of 84.5.

See the chart below for a long-term perspective on this widely watched index. I've highlighted recessions and included real GDP to help evaluate the correlation between the Michigan Consumer Sentiment Index and the broader economy.

To put today's report into the larger historical context since its beginning in 1978, consumer sentiment is now 1% below the average reading (arithmetic mean) and spot on the geometric mean. The current index level is at the 42nd percentile of the 426 monthly data points in this series.

The Michigan average since its inception is 85.2. During non-recessionary years the average is 87.6. The average during the five recessions is 69.3. So the latest sentiment number puts us about 15 points above the average recession mindset and 3 points below the non-recession average.

It's important to understand that this indicator can be somewhat volatile. For a visual sense of the volatility here is a chart with the monthly data and a three-month moving average.

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.

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).

The trend in sentiment since the Financial Crisis lows has been one of slow improvement.