US Consumer Sentiment Holds Steady In March, Inflation Expectations Remain Above Fed's 2% Target

by

The latest report on U.S. consumer confidence, carried out by the University of Michigan, shows a broadly stable figure for the overall sentiment index, while still holding onto high expectations for inflation according to preliminary data from March released on Friday.

"Consumer sentiment moved little this month with a 0.4 index point decrease that is well within the margin of error, and thus sentiment has been steady and essentially unchanged since January 2024," Surveys of Consumers Director Joanne Hsu, said.

UMich Consumer Sentiment Report For March: Key Highlights

  • The University of Michigan consumer sentiment index marginally eased from 76.9 to 76.5 in March, slightly missing expectations of an unchanged reading.
  • The sub-index for consumer expectations inched down from 75.2 to 74.6 in March, below the expected 75.1.
  • The sub-index for current conditions held flat at 79.4 in March, slightly above the expected 79.2.
  • The year-ahead inflation expectations remained at 3%, while long-term inflation expectations held at 2.9%, both
Economist Takeaways

According to Joanne Hsu, sentiment has remained nearly 25% higher than in November 2023 and currently stands midway between the record low experienced during the peak of inflation in June 2022 and the pre-pandemic levels.

While there have been slight improvements in personal finances, these have been counteracted by modest decreases in expectations regarding business conditions.

Following substantial increases from November 2023 to January 2024, consumer perspectives have stabilized, indicating a holding pattern.

However, many are refraining from making definitive judgments about the economy's trajectory, especially in the long term, awaiting the outcomes of the upcoming November election.

Market Reactions: Markets showed minimal movement in response to the Michigan consumer sentiment report, maintaining a risk-averse environment following this week's hotter-than-expected inflation data.

The SPDR S&P 500 ETF Trust (NYSE: SPY) was 1.1% lower at 10:10 a.m. in New York. The tech-heavy Nasdaq 100, as tracked by the Invesco QQQ Trust (NASDAQ: QQQ) showed a similar trend.

Bitcoin, a key gauge for risk sentiment, was down 4.5%, while gold held steady at $2,160/oz.

Energy stocks outperformed, with the Energy Select Sector SPDR Fund (NYSE: XLE), up 0.7%.