Main takeaways:
  • Preliminary Michigan Sentiment in November at 93.1, up 3.1 points from the October estimate.
  • This was largely due to a stronger outlook for the domestic economy.
  • The overall tone of the report was very positive (see quotes below). Current level of Sentiment is associated with real consumption growing at 3.5%.
  • Historical episodes show that real consumption grows in the 2.5%-4.5% range while Sentiment is near current levels.
  • 5-10y inflation expectation remained at the 2.5% level, the lowest rate ever recorded.

Additional highlights in the report:
  • "The largest gains were among households with incomes in the bottom two-thirds of the distribution"
  • "Sentiment gain among households with incomes in the top third rose marginally"
  • "Buying plans for large discretionary purchases improved"
  • "Six-in-ten consumers expect interest rates to increase in the months ahead; that proportion has not increased in the past few months"
  • "Assessments of current personal finances improved in early November"
  • "For the second month, consumers anticipated an annual long term inflation rate of 2.5%, which ties the lowest rate ever recorded"
  • "The decline in the near term inflation rate appears to have been due to consumers finally becoming less skeptical that gas prices will actually remain at current lows in the year ahead"
  • "Consumers reported more positive economic developments in early November, primarily about gains in employment, as well as fewer negative reports about domestic stocks, the global economy and international trade"
  • "The majority of consumers anticipated that good times would persist uninterrupted by any downturns over the next five years"

Preliminary Michigan Sentiment in November at 93.1, up 3.1 points from the October estimate.


Looking closer at the relationship between Michigan Sentiment and household consumption:
The chart below plots the 3mma of Michigan Sentiment in the x-axis and real consumption (3mma, YoY) in the y-axis. The vertical black line shows the most recent monthly print. The expected growth rate of consumption based on the latest Sentiment reading would be close to 3.5%.

Perhaps even more important, the current level of Sentiment is compatible with consumption growth in the 2.5%-4.5% range, with a few outliers above this range and no episode of real consumption growth below 2% in the vicinity of the current level for Michigan Sentiment.


Inflation expectations remained at 2.5%, the lowest rate ever recorded (touched briefly in Sep/2002)