US consumer sentiment index

According to a report from the University of Michigan, the US consumer sentiment index has improved in December 2016. It stood at 98.2 in December 2016 as compared to 93.8 in November. The reading came in above the preliminary estimate of 98.

US Consumer Sentiment Index Rose: What It Means for the Economy

The consumer sentiment index focuses on three areas:

  • What are consumers’ views of their own financial situation?
  • How do consumers view the general economy over the short term?
  • How do consumers view prospects for the economy over the long term?

Impact on the economy

The improvement in the consumer sentiment index is a positive sign for the economy. The US consumer sentiment index improved in December as compared to November, which indicates that consumers’ overall situation is improving. The increase in per capita income is a welcome sign for the economy (SPXL) (IWM). The labor market is also showing improved figures. An improvement in the labor market conditions could speed up consumer spending in the economy (VFINX) (VOO) (SPY) in the near future.

The improvement in this index also indicates that consumers’ long-term view of the economy (IWF) (QQQ) is improving. The Fed has also indicated we could see a faster rate hike process in 2017. Interest rate hikes are appropriate when the economy is on a stronger path. According to the consumer sentiment index, the long-term path for the economy is improving, so it’s more likely the Fed could tighten interest rates.

In the next part of this series, we’ll analyze the performance of the US third quarter GDP.

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