Today's Report (10/15/2021)

Consumer sentiment has remained for the past three months at the lows first recorded in response to last year's shutdown of the economy. The Delta variant, supply chain shortages, and reduced labor force participation rates will continue to dim the pace of consumer spending into 2022. There is another, less tangible factor that has contributed to the slump in optimism: confidence in government economic policies has significantly declined during the past six months. To be sure, the DC logjam, including the debates on the debt ceiling and the $3.5 trillion social infrastructure program did not help, but the staged drama was largely ignored by most consumers.

What Is It?

The US Index of Consumer Sentiment (ICS), as provided by the University of Michigan, tracks consumer sentiment in the US, based on surveys on random samples of US households. This is a monthly survey of US consumer confidence about the national economic conditions.

What Are The Fundamental Effects?

It is a proven accurate indicator of the future course of the national economy. Higher consumer sentiment could lead to higher inflation.

Why Investors Care?

When consumer confidence increases, certain sectors tend to benefit sooner than others. Companies that provide consumer goods often reap the initial fruits of improved consumer sentiment. Consumers who feel more confident about the economy generally also feel better about their employment prospects and are therefore more willing to buy houses, cars, appliances, and other items. Investors should look at the stocks of car manufacturers, home builders, and other retailers that typically see sales rise when the economy begins an expansion period.

The dollar's value also tends to fluctuate in accordance with the rise and fall of the Michigan Sentiment, so traders and speculators can take positions to profit from sudden moves that may occur when the index is posted.

How Does It Affect The Markets?

CURRENCY - Foreign investors favor happy American customers, as personal spending increases.

STOCKS - The equity market prefers when consumers are confident because they are more likely to take more risky investments.

BONDS - As consumer sentiment rises it could mean that’ll spend more on riskier investments, which could lead to bond prices being reduced and yields rising to attract more investors.

University of Michigan 1 YR Inflation

University of Michigan (UoM) Inflation Expectations measures the percentage that consumers expect the price of goods and services to change during the next 12 months. There are two versions of this data released two weeks apart, Preliminary and Revised. The preliminary release is the earliest so tends to have more impact.