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Consumer Expectations Remain Less Favorable In December

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Consumer sentiment rises to 91.8

According to the University of Michigan, the consumer sentiment preliminary index rose to 91.8 in December from 91.3 in November 2015. Though income is rising, consumer spending is staying low.

As a result, the Consumer Discretionary Select Sector SPDR ETF (XLY) and First Trust Consumer Discretionary AlphaDEX ETF (FXD) were down 2.3% and 1.9%, respectively, as of December 11. The Walt Disney Company (DIS), The Home Depot (HD), and Comcast (CMCSA) were down 2.5%, 1.6%, and 2.9%, respectively, as of December 11.

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Future expectations remain less favorable in December

As quoted by Richard Curtin, the University of Michigan’s Surveys of Consumers’ chief economist, “while the preliminary December reading was largely unchanged from last month, consumers evaluated current economic conditions more favorably and expected future prospects less favorably. In a repeat of last month’s findings, all of the early December gain was recorded among households with incomes in the bottom two-thirds (+2.7%), while the Sentiment Index among consumers with incomes in the top third declined (-4.4%). Importantly, the survey recorded persistent strength in personal finances and buying plans, while the largest loss was in how consumers judged prospects for the national economy during the year ahead. Overall, the Sentiment Index has averaged 92.9 during 2015, the highest since 2004, with only 10 higher yearly averages in the past half century. The data continue to indicate that real consumer expenditures will grow by 2.8% in 2016 over 2015.”

Consumer current condition index jumps to 107.0 in December

In December, the index of current conditions has jumped to 107.0, compared with 104.3 in November. In contrast, future expectations have declined to 82.0, against 82.9 in November. Consumer sentiment has fallen by 1.9% from a year ago, with a decrease in consumer expectations of 5.1% in December 2015.

Though inflation has stayed lower, it has failed to boost consumer sentiment in the economy. With the Federal Reserve’s hawkish tone on a rate hike and the festive season ahead, it remains to be seen if consumer confidence will rise.

In the next part of this series, we’ll look at total US business sales and inventory data for clues on future growth.


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