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Consumer Sentiment Tumbles from October Highs

Matt Eidinger November 10, 2017

A little over a year after Donald Trump was elected President and stock markets began what has been termed the “Trump Rally” – consumers are now feeling slightly downtrodden. The University of Michigan’s consumer sentiment index fell to 97.8 in early November –tumbling from the 101.3 level recorded on October 13th. Year-over-year growth still stands at 4.3 percent, but this morning’s print represents a monthly decline of 2.9 percent – disappointing markets which had expected recent gains to be sustained.

Views on current economic conditions declined modestly, but those surveyed expected the economic expansion to persist – and there was a slight rise in inflation forecasts for the coming year. Consumers believe that wage growth will continue rising to hit the highest level in the past decade, and that the Federal Reserve will continue its policy of gradually raising rates. According to the Bureau of Labor Statistics, which will release its data for the month of October next Wednesday, inflation is currently on track to record an increase of roughly 2.1 percent through 2017.

Bottom Line: Despite a slight downturn in the headline number, consumer sentiment levels remain near the highest levels seen this year (and since the early 2000’s). This optimism reflects strong underlying fundamentals – the economy continues to pump out new jobs on a consistent basis each month, and unemployment is nearing a 17-year low. Although some obstacles remain to tax reform in the United States, the stock market continues to hit record highs, and spending levels remain robust. Consumers aren’t “Trumped out” quite yet.

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