Michigan Consumer Sentiment Index Preview: Lower is relative

• Consumer confidence expected to decline in January 

• Sentiment levels to remain strong on labor market and wages

• Looking for consumer impact from the partial government closure

The University of Michigan will release it Consumer Sentiment Index for January at 10:00 am EST 15:00 GMT on Friday January 18th. 

Predictions

The sentiment index is forecast to fall to 97.0 from 93.3 in December.  The current conditions index is predicted to drop to 114.5 from December's 116.1. The expectations measure will slip to 86.0 in January from 87.0 in December

Consumer sentiment, wages and employment

The US consumer sector has been enjoying an exceptional time for the past two years. Beginning with the sharp rise in sentiment in 2016 from 87.9 in October to 98.5 in January 2017 the three month moving average of the Michigan Consumer Sentiment Index has remained above almost all scores for the past 18 years. 

Reuters

Reasons are not hard to find. People are more confident about keeping their jobs or finding new ones. They have more money to spend and more are working than ever before.

The unemployment rate has declined from 4.9% in October 2016 to 3.9% last month. Even the 0.2% increase in December was because over 400,000 people joined the work force and the labor force participation rate rose to 63.1% from 62.9%.  The twelve month moving average in non-farm payrolls has climbed from 168,000 in September 2017 to 220,000 in December 2018.  

Manufacturing employment has experienced a phenomenal expansion. Since December 2016 the economy has added almost 500,000 factory jobs. The twelve month moving average of new manufacturing positions of 23,667 is the best performance in over 20 years and is reminiscent of the cyclical increases of a generation ago. This has taken place when many economists and politicians had written off well-paid manufacturing employment as a thing of the past.

Reuters

The annual moving average in yearly wage earnings has increased from 2.57% in January 2017 to 2.86% in December. That is the highest twelve month reading in over a decade since

Consumers have behaved in a most rational manner in the past two years, accurately reporting their improved circumstances to the academic surveyors of Michigan University. That should continue despite the month long closure of one quarter of the Federal government in the funding dispute between the Democratic House and Pesident Trump over a barrier on Mexican border.