The University of Michigan Consumer Sentiment Index increased in April, coming in at 95.9, matching expectations for the month and confirming a moderate increase from the March index reading of 93.0.
Those surveyed indicated that they have become more optimistic in general in the past month – not only about current economic conditions, but also about the future as well.
Consumers generally feel more confident when the jobs market is strong, the stock market is elevated, and gasoline prices are low – all of which helps to explain why sentiment remains near post-recessionary highs.
A positive consumer outlook typically can nurture spending growth, and that has happened to a degree in recent years. However, the current expansion has been characterized in part by a more cautious consumer, likely held in check by limited income growth and an increased focused on increasing savings and reducing debt.
As the jobs market continues to tighten, expectations have been for wage growth to accelerate in due time. The recent news that the US employment cost index (ECI) rose at a strong pace during the first quarter may indicate that stronger wage growth is now at the doorstep, but it’s too early to conclude definitively.
It’s worth noting that the survey was completed before yesterday’s release of first quarter GDP, which was quite disappointing. Nonetheless, it was already readily apparent that the economy had slowed earlier this year.
The fact that consumers remained stoic in the face of softer jobs data and an increasingly choppy stock market suggests a degree of resilience that should support consumer spending and overall growth.