University of Michigan Consumer Sentiment 

Final Results for May 2018

The University Of Michigan Consumer Sentiment for May slipped by less than an index point to 98.0, slightly lower than April’s reading of 98.8.  The Current Economic Conditions Index slipped to 111.8 from April’s final reading of 114.9.  Consumer Expectations increased to 89.1 from Aprils 88.4. 

Since President Trump’s election, Consumer Sentiment has been in a tight eight-point range between 93.4 and 101.4.   Consumers remain focused on jobs and incomes, anticipating increases in interest rates and inflation for the remainder of the year. Past expansions have revealed that rising interest rates do not suppress spending gains if they are accompanied by significant increases in income. 

The May survey indicated that consumers are expecting smaller income gains then they did a month ago.  More importantly references to discounted prices for vehicles, durable goods and homes declined to decade low readings.  According to chief economist, Richard Curtin, “Coupled with higher interest rates, it is likely that the pace of growth in personal consumption will remain at about 2.6% during the year ahead.”

Durable Goods

New orders for durable goods in April decreased 1.7% to $248.5 billion.  This follows a 2.7% increase in March and a 4.5% increase in February.  Excluding transportation new orders increased 0.9% and excluding defense new orders decreased 1.9%.  Transportation was a drag and defense orders were a boon.  Transportation equipment was dragged lower by nondefense aircraft and parts which decline 29% after increasing 60% in the previous month.  New orders (-1.7%) were slightly lower than analyst expectations of a decline of 1.6%.  While new orders excluding transportation came in better than expectations, increasing 0.9% versus analyst expectations of 0.6%.

Shipments were down 0.1% after eight consecutive up months. New orders for transportation equipment were down 6.1% while shipments were down 2.1%.  Defense new orders increased 3.1% and shipment increased 12.9%.   Unfilled orders increased 0.5% with transportation leading the way.  

An important proxy for business investment fared much better.  New orders for non-defense capital goods excluding aircrafts rose 1% in April, offsetting a March decline.