The University of Michigan Consumer Sentiment Index preliminary report for June came in at 71.8, down from the 74.3 May final number. The Briefing.com consensus expectation had been for 73.5 and Briefing.com’s own forecast was for 72.0.
See the chart below for a long-term perspective on this widely watched index. Because the sentiment index has trended upward since its inception in 1978, I’ve added a linear regression to help understand the pattern of reversion to the trend. I’ve also highlighted recessions and included real GDP to help evaluate the Michigan Consumer Sentiment Index as an indicator of the broader economy.
To put today’s report into the larger historical context since its beginning in 1978, consumer sentiment is about 16% below the average reading (arithmetic mean), 15% below the geometric mean, and 18% below the regression line on the chart above. The current index level is at the 18th percentile of the 402 monthly data points in this series.
The Michigan average over since its inception is 86. During non-recessionary years the average is 88.7. The average during the five recessions is 69.3.
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 general pattern and trend are 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).
Consumer and small business sentiment remains close to levels associated with other recent recessions, but the trend since the Financial Crisis lows has been one of general improvement. It remains to be seen whether the latest monthly data will subsequently be seen as a reversal.
Doug Short Ph.d is the author of dshort.com.