ANN ARBOR—Consumer sentiment in the November 2019 survey was nearly identical to the average level recorded since the start of 2017 (96.8 versus 97), according to the University of Michigan Surveys of Consumers.

In 30 of the past 35 months, the Sentiment Index was 95 or higher, a level of optimism second only to when the index was above 100 for 34 out of 36 months from January 1998 to December 2000.

Although impeachment proceedings occurred in both time periods, in the earlier period it did not cause an overall loss in confidence, said U-M economist Richard Curtin, director of the surveys. While impeachment has not recently influenced economic confidence, it could in the months ahead, he said.

The major difference between the two impeachment eras is that the current situation is accompanied by much sharper partisan divisions, he said. These divisions have so far kept the Sentiment Index unchanged at quite favorable levels, showing only small monthly variations. Overall, the data indicate that consumer spending will grow by 2.5% in 2020.

“At no other time in the past half century have the divisions in economic expectations been as wide among consumers as well as between consumers and business firms,” Curtin said. “While the partisan divisions among consumers are wide, consumer spending will continue to offset the weaknesses in business investment spending to maintain the expansion, although at a slower pace of growth.

“There are significant risks associated with tariffs, impeachment, the election, global growth and geopolitical events. It has been differences in how these risks have been assessed that underlie the partisan differences among consumers and the gap in optimism between the business and consumer sectors.”

Consumers Expect Little Change in Key Economic Factors

Consumers anticipated that inflation, unemployment and interest rates will remain at very favorable levels in the year ahead. Consumers are not so naïve to expect continued declines, but they do not anticipate worrisome increases in these key economic factors, Curtin said.

The near- and longer-term outlooks for the national economy improved in November, with the data tilting toward the expectation of a continued expansion during the year ahead.

Strength in Personal Finances

When asked to assess their current finances, 54% of all households reported that their finances had recently improved. There have only been nine other surveys in the past half century that recorded a higher percentage; the all-time peak was just three percentage points higher at 57%.

When asked about expected income gains during the year ahead, the most interesting result was that those gains were nearly equally shared by households across the income distribution, Curtin said. Among consumers under 45, who are most likely to be employed, the annual expected gain was 4.6%.

Consumer Sentiment Index

The Consumer Sentiment Index rose to 96.8 in November 2019, posting its third monthly increase, but remained slightly below last November’s 97.5. The Expectations Index rose slightly to 87.3 from last month’s 84.2 but remained below last year’s 88.1. The Current Conditions Index fell to 111.6 from last month’s 113.2 and from last year’s 112.3.

About the Surveys

The Surveys of Consumers is a rotating panel survey based on a nationally representative sample that gives each household in the coterminous U.S. an equal probability of being selected. Interviews are conducted throughout the month by telephone. The minimum monthly change required for significance at the 95% level in the Sentiment Index is 4.8 points; for Current and Expectations Index the minimum is 6 points.

Surveys of Consumers
U-M Institute for Social Research