The mood of the U.S. consumer faltered in April, as their outlook for future economic conditions dimmed further.
The University of Michigan Consumer Sentiment Index dipped to 89.0 in April, declining moderately from a 91.0 reading in March. The result reinforced a similar downward trend in the Conference Board’s Consumer Confidence Index released earlier this week.
Sentiment has been edging steadily lower since the beginning of the year, having now declined for four consecutive months. At its current level, the index is at its lowest point since September of last year and is well below its level of 95.9 one year ago.
The underlying story is mixed. Consumers’ assessment of current economic conditions has been virtually unchanged in the past year, and actually improved in the past month. Solid labor market conditions, low gas prices, increasing wage growth, and the rebound in equity prices are likely supporting that view.
Conversely, expectations for the future direction of the economy continue to dim, as pessimism about the outlook for the economy continues to rise. As the likely nominees for each party in the upcoming Presidential election are becoming clear, there were indications that recent policy rhetoric may be a negative factor in the souring outlook.
As confirmed by yesterday’s report on first quarter growth, the economy slowed to start the year. Consumers appear to largely be shrugging that off, but remain more concerned about what the near-term future may hold. Nonetheless, consumer spending was a relative bright spot to start the year, and personal consumption is still projected to grow by 2.5% for 2016. Even if the business sector and trade remain weak, core household consumption and housing sector strength should be sufficient to sustain moderate growth in the coming quarters.