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Consumers grow more optimistic about their present circumstances

Partisan gap on economic outlook begins to close

Consumers grew more optimistic about their present situation than at any point since 2000, according to the Survey of Consumers conducted by the University of Michigan.

The Index of Consumer Sentiment increased to 98 at the beginning of April. This is up 1.1% from March's 96.9 and up a full 10.1% from 89 in April 2016.

“Consumer sentiment inched upward in early April mainly due to more favorable views of current economic conditions,” Surveys of Consumers Chief Economist Richard Curtin said. “The Current Economic Conditions Index rose to its highest level since 2000 and nearly reached its all-time peak of 121.1 set in 1999.”

An article by Jill Mislinski for Advisor Perspectives explains what this means historically:

The Michigan average since its inception is 85.4. During non-recessionary years the average is 87.6. The average during the five recessions is 69.3.

The Current Economic Conditions index increased 1.8% from 113.2 in March and 8% from last year’s 106.7 to 115.2 at the beginning of April.

The Index of Consumer Expectations increased less month-over-month at 0.5% increase from 86.5 in March to 86.9 at the beginning of April. However, this is an increase of 12% from last year’s 77.6.

And at last the partisan gap in consumer sentiment began to decrease, although it still has a long way to go before levleing out to normal levels.

“While partisanship had no impact on the Current Conditions Index, Democrats and Republicans differed by just 0.4 points, the data suggests the beginning of a convergence on the Expectations Index,” Curtin said. “With the figure for Democrats rising 7% and falling for Republicans by 7%, although the gap still remained an astonishing 50.5 index points.”

“Much more progress on shrinking the partisan gap is needed to bring economic expectations in line with reality,” he said. “A slow pace of convergence will make it more difficult to disentangle political fervor from what appears to be a growing sense among consumers that the economy will experience fundamental changes in the years ahead.”

Curtin explained optimism will mix with uncertainty to cause uneven spending patterns in the months to come.

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