Economic Watch: Consumer Sentiment Hits 6-Month Low, Housing Starts Fall
Consumers are feeling less upbeat, due to uncertainty about economic conditions following the tax overhaul recently signed into law, according to a new report. Meanwhile the level of new home construction last year was the best in a decade despite a December decline.
The University of Michigan’s Survey of Consumers reported its Index of Consumer Sentiment showed a small preliminary decline this month from last, down 1.6% to a reading of 94.4. The drop from the same time a year earlier was larger, 4.2%.
This is a six-month low and comes after the gauge in October 2017 hit its highest level since 2004. It’s also in contrast to a consensus forecast from analysts who expected it to move higher in January.
There were also declines in consumers’ evaluation of current economic conditions. Their expectations were slightly better than December but down from January 2016.
The survey recorded persistent strength in personal finances and buying plans. Favorable levels of buying conditions for household durables have receded to preholiday levels in early January, largely due to less attractive pricing, according to Surveys of Consumers Chief Economist Richard Curtin.
“Tax reform was spontaneously mentioned by 34% of all respondents, 70% of those who mentioned tax reform thought the impact would be positive, and 18% said it would be negative,” he said. “The disconnect between the future outlook assessment and the largely positive view of the tax reform is due to uncertainties about the delayed impact of the tax reforms on the consumers. Some of the uncertainty is related to how much a cut or an increase people, especially high-income households who live in high-tax states, face.”
He noted while near- and long-term gasoline price expectations inched upward in early January, they remained significantly below their peak. Also, while long-term inflation expectations remained at their 2017 average level and short-term …Read the rest of this story
