MACRO: Rising consumer sentiment

A consumer sentiment reading for March from the University of Michigan jumped to the highest level in a year following the "third disbursement of relief checks and better than anticipated vaccination progress,” said Richard Curtin, chief economist of the survey. Consumer sentiment was revised higher to  84.9 in March, up from a preliminary estimate of 83 and above analysts' expectations of 83.6.

Today's reading showed the largest increase in consumer morale since May 2013. Source: Bloomberg via ZeroHedge

Meanwhile, expectations were revised higher to 79.7 from 77.5 and compared to February’s 70.7. The current conditions gauge rose to 93, above a preliminary of 91.5 and up from February’s 86.2. Highly anticipated by investors and policy makers, inflation expectations for the year ahead dropped slightly to 3.1% from 3.3% in the previous month, matching initial figures; while the 5-year outlook increased to 2.8% from 2.7%. “ The recovery is far from complete as less than half of the fall in consumer sentiment has so far been recovered, and the current and prospective stimulus and infrastructure spending has the potential to spark a renewed inflationary psychology, although that will not occur immediately,” Curtin said. 

“Inflationary psychology preceded actual inflation by about two years in the last bout in the 1970s. The key balance is not to underestimate the ultimate impact of those policies on jobs and inflation, and not to overestimate the ability of policies to bring any excesses to a painless soft-landing.”

Buy-in-advance psychology preceded actual inflation by about two years prior to 1980, with the lead time more variable and with no resurgence in the low inflation era. Source: ZeroHedge, Bloomberg.