USA Consumer Sentiment Continues at Multi-Year Highs

USA Consumer Sentiment: Thomson Reuters / University of Michigan

Consumer confidence remained largely unchanged from last month at its highest level in five years. When asked to identify any recent economic news, consumers more frequently made unfavorable references to potential changes in future federal tax and spending programs as well as the inability of the political parties to reach a timely settlement. There have only been five other surveys during the past half century in which more consumers spontaneously mentioned their uncertainty about government policies. Interestingly, the past occurrences were also related to taxes, spending, and the federal deficit: Clinton’s deficit reduction program in 1993 and last summers debt ceiling debate which prompted a drop in the Sentiment Index to 55.8, the fourth lowest level recorded in the long history of the surveys. While consumers remain optimistic, that optimism is contingent on the promise of no higher taxes, except on the wealthy.

USA Consumer Sentiment by Month



USA Consumer Sentiment by Year



"The gains in confidence ended in late November as consumers became more uncertain about when and how the fiscal cliff with be bridged. While they had anticipated a last minute settlement, some consumers are beginning to doubt whether that will happen before higher tax rates take effect in January. While a resolution just before year-end could reverse any future spending declines, it would nonetheless diminish holiday spending. Moreover, consumers do not make a distinction between federal income and payroll taxes, so any settlement that excludes an extension of the payroll tax cut could reduce optimism starting in early January."

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