Consumer Sentiment Finishes Out September Strong

U.S. consumer sentiment finished out the month of September at its strongest in more than a year and at the highest since July 2013. The Thomson Reuters/University of Michigan’s final September reading on the overall index on consumer sentiment finished at 84.6, which up from 82.5 at the end of August.

Economists polled by Reuters had expected a reading of 84.7, and late September reading was unchanged from its initial figure.

“The main factor promoting greater confidence in September was more favorable prospects for the domestic economy as well as more favorable personal income expectations,” survey director Richard Curtin said in a statement.

Curtin said the September index reading, which was the second highest in the last seven years, suggests we could see an acceleration in consumer spending in the next 12 months. They are estimating that consumer spending could grow at a 2.7 percent pace.

The survey’s gauge of consumer expectations ended at 75.4 in late September, which was also the highest measured reading since July 2013 on a final basis. However, it was still slightly lower than a preliminary reading of 75.6 reported earlier in the month. Yet, it was higher than the 71.3 reading in August and beat out a forecast of 75.0.

The survey’s barometer of current economic conditions was 98.9 in late September, compared with 98.5 seen earlier this month. It was lower than August’s 99.8 and above a forecast of 98.0.

The survey’s one-year inflation expectation fell to 3.0 percent from 3.2 percent and the survey’s five-to-10-year inflation outlook was at 2.8 percent from 2.9 percent. The late September inflation readings were unchanged from their early September levels.

However, in July of 2013, the government changed the way it calculated GDP growth and relies upon the Thomson Reuters/University of Michigan’s survey to follow its lead. This can help explain why it is Americans tell pollster after pollster that their purchasing power is eroding, which is more inline with the affects and impacts of the Fed’s bond-buying — or, money-printing — monetary policies.

These new methods to calculate CPI, or Consumer Price Index, as well as other measurements, have a hedonic adjustments applied to it. In other words, the government is masking the inflation numbers. If we factor in the recent adjustment in the GDP number, we have a double incremental effect on real GDP and far higher inflation rates than reported.