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U.S. Consumer Sentiment Signals Gains in Spending Remain Likely

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U.S. consumer sentiment holding near post-election highs reflects an improved outlook on wages and indicates spending is poised to rebound, though a partisan gap persists, University of Michigan survey data showed Friday.

Highlights of Michigan Sentiment (May, Final)

  • Sentiment index at 97.1 (forecast was 97.5) after 97 in April; preliminary reading was 97.7
  • Expectations measure improved to 87.7 from 87; preliminary reading was 88.1
  • Current conditions gauge, which measures Americans’ perceptions of their personal finances, fell to 111.7 from 112.7 in the prior month and the preliminary reading

Key Takeaways

Despite the political controversies engulfing the White House, favorable views on President Donald Trump’s economic policies continue to buoy consumer sentiment, especially among members of his party. Notably, 79 percent of Republicans expect the economy to continue expanding while 66 percent of Democrats anticipate a recession over the next five years. While overall expectations of income gains in the year ahead increased to 2 percent from 1.6 percent, the boost in confidence hasn’t yet fueled a major uptick in economic activity.

Official’s Views

“Since no major policies, such as healthcare, taxes, or infrastructure spending have yet been adopted, the partisan divide may reflect differences in policy preferences expressed as expected economic outcomes,” Richard Curtin, director of the University of Michigan consumer survey, said in a statement. “The extreme partisan divide may persist until passage is deemed either inevitable or impossible.”

Other Details

• Among Republicans, 75 percent expect economic conditions to improve during the year, compared to 16 percent of Democrats
• Consumers saw inflation rate in the next year at 2.6 percent, compared with 2.5 percent in the prior month
• Inflation rate over next five to 10 years was unchanged from the previous month at 2.4 percent
• Data on buying plans indicate light vehicle sales this year won’t increase much above the 2016 peak

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