Michigan Shopper Sentiment Rose For First Time In 5 Months

Klaus Vedfelt

Consumer sentiment rose for the first time in five months, according to the final August report for the Michigan Consumer Sentiment Index. The index rose 1.5 points (2.3%) from July’s final reading to 67.9. The latest reading was above the forecast of 67.8.

The Michigan Consumer Sentiment Index is a monthly survey of consumer confidence levels in the U.S. with regard to the economy, personal finances, business conditions, and buying conditions, conducted by the University of Michigan. There are two reports released each month; a preliminary report released mid-month and a final report released at the end of the month.

Joanne Hsu, the director of surveys, made the following comments:

Consumer sentiment confirmed its early-month reading; after drifting down for four months, sentiment inched up 1.5 index points above July and is currently 36% above the all-time historic low from June 2022. Consumers’ short- and long-run economic outlook improved, with both figures reaching their most favorable levels since April 2024 and a particularly sizable 10% improvement for long-run expectations that was seen across age and income groups. Sentiment this month reflects a slight rise in sentiment among Independents, as Democrats and Republicans offset each other almost perfectly. Democrats exhibited a large 10% increase in sentiment while Republicans posted an equally sized decline. These patterns resulted from a sea change in election expectations this month with Harris emerging as the Democratic candidate for president. In July, 51% of consumers expected Trump to win the election versus 37% for Biden. In August, election expectations flipped; 36% expected Trump to win compared with 54% for Harris. Economic and election expectations are both subject to change as election day approaches.

See the chart below for a long-term perspective on this widely watched indicator. We’ve highlighted the value of the index at the start of each recession and also included a callout to the most recent 12 months. The current level of 67.9 is below the index’s level at the start of 5 of the 6 recessions since the index’s inception.

To put today’s report into the larger historical context, since its beginning in 1978, consumer sentiment is 19.9% below its average reading (arithmetic mean) of 84.8 and 18.9% below its geometric mean of 83.7. The current index level is at the 14th percentile of the 560 monthly data points in this series.

This indicator is somewhat volatile, with a 3.1 point absolute average monthly change. The latest data point saw a 1.5 point decrease from the previous month. For a visual sense of the volatility, here is a chart with the monthly data and a three-month moving average. The bottom half of the chart shows real GDP to help us evaluate the correlation between the Michigan Consumer Sentiment Index and the broader economy.

Other Sentiment Indicators

For an additional perspective on consumer attitudessee the most recent Conference Board’s Consumer Confidence Index. Both indexes gauge consumer attitudes toward the current and future strength of the economy. However, the Consumer Confidence Index is more influenced by employment and labor market conditions, while the Michigan Sentiment Index is more focused on household finances and the impact of inflation.

The Conference Board index is the more volatile of the two, but the broad pattern and general trends have been remarkably similar to the Michigan index.

And finally, the prevailing mood of the Michigan survey is also similar to the mood of small business owners, as captured by the NFIB business optimism Index (monthly update here).