UoM CSI to Rebound in October

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The monthly consumer sentiment index from the University of Michigan will be coming out today.

Economists do not expect to see any major changes from the preliminary estimates. Forecasts indicate that it will hold steady at 96.0.

This marks a modest rebound from the month before which was a three-month high.

UoM Consumer Sentiment inde
UoM Consumer Sentiment inde

The consumer sentiment index for September saw a revision from 92.0 to 93.2. The UoM consumer sentiment hit a high at 101.00 in May this year. But, since then, consumer sentiment is in a downtrend.

The forward looking indicator rebounded during the month, according to the preliminary estimates.

The rise in the index came on the back of consumers expecting larger gains in income and lower inflation for the year ahead.

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Consumers also expect the real income to rise as a result. The rate cuts from the Federal Reserve is helping to improve the consumer sentiment at the very least, bolstering plans for spending.

Despite this outlook, consumers were of the view that the domestic economy in the United States will continue to rise at a slower pace.

October was relatively stable in relation to the trade talks. The United States and China made progress on trade talks, with indications that a phase one deal is almost ready.

It would mark big progress in an issue that has plagued not just consumers in the United States, but the global economy as well.

Various financial institutions and watchdogs have become more vocal in calling for the trade disputes to be resolved amicably.

Outlook for Economic Growth Remains Bleak

Despite the small progress, the overall outlook for the US economy continues to be bleak. In early October, the IBD/TIPP economic outlook report showed that consumers had a pessimistic view on the economic growth.

Economic data from the United States, especially in the past few weeks has been weaker as well. While on one hand, there are signs that the trade talks could be resolved, the possibility of a Presidential impeachment comes as a concern.

Growth in the United States has slowed and is expected to lose momentum in the coming quarters. Global manufacturing has taken a big hit due to a number of factors including the late growth stage.

Despite the Fed doing its bit to cut interest rates, it will take some time for the effects of cheaper credit to pass through to average consumers.

Consumer sentiment is still in a good spot, especially when compared to a year ago. This is consistent with the view that the US economy still has room to grow.

For the moment, various measures of consumer sentiment surveys show that it is still too early to ring the alarm bells. Economists and market watchers have been keeping a close eye on various indicators for signs of a possible recession.

Despite the initial scares at the start of this year, the economic data continues to chug along, albeit at a slower pace.

With the markets looking to the final quarter of the year, there is a slight chance that consumer sentiment will close out at the current highs.

UoM Inflation Expectations Drop to 2.2%

Besides the consumer sentiment index, the UoM will also be releasing the inflation expectations report. The preliminary estimates saw inflation expectations falling to 2.2%. That is the inflation expectations over the 10-year time frame.

October’s preliminary inflation expectations report marks the lowest inflation expectations on record. It was down from 2.4% in the previous month.

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