The University of Michigan released its September update for their surveys of consumers. The overall index of consumer ‘sentiment’ was unchanged from August at 89.8, and up just 3% from last September. This ‘confidence’ index peaked in January 2015 at 98.1 and has been sideways to lower ever since. Most of the internals were practically unchanged throughout, leading Chief Economist Richard Curtin to note:
…modest gains in the outlook for the national economy have been offset by small declines in income prospects as well as buying plans
Not everything in the surveys was so uninteresting. Inflation expectations dropped yet again, as both short-term and intermediate consumer projections for the rate of prices changes continue to sink. The surveyed result for the inflation rate next year fell to 2.3%, the lowest since September 2010 just prior to the start of QE2. Straight away, it would appear that consumers are no longer so convinced that ‘money printing’ actually accomplishes what money printing is supposed to.
Since the data is made up of surveys of American consumers we are really talking about perceptions, and thus this reduction in expected inflation has been shaped by recent (money, not monetary policy) events. The peak outlook, the one most faithful to the myth of ‘money printing’, was reached not surprisingly in early 2011. Since then, shorter-term expectations were as inflation breakevens in the TIPS part of UST trading; seemingly stable but only as a matter of being unconvinced about policy efficacy, primarily QE.
This post was published at David Stockmans Contra Corner on September 16, 2016.
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