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US Consumer Sentiment Rose: What It Means for the Economy

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US consumer sentiment  

According to a report from the University of Michigan, the US Consumer Sentiment Index improved in March 2017. It stood at 96.9 in March 2017 compared to 96.3 in February 2017. However, it was lower than the preliminary reading of 97.6.

The Consumer Sentiment Index focuses on three questions:

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

The improvement in the US Consumer Sentiment Index is a positive sign for the economy. It indicates that the overall situation for consumers seems to be improving.

The improvement in this index also indicates that consumers’ long-term view of the economy (IWF) (QQQ) is improving. Consumers seem optimistic about Donald Trump’s presidency. However, the market showed some pullback in March 2017. On the other hand, the Federal Reserve is also continuing its gradual rate hike process and it hinted at a hawkish stance for the upcoming years.

Interest rate hikes are appropriate when the economy is on a strong path. According to the US Consumer Sentiment Index, the long-term path for the economy (VFINX) (SPY) (IVV) is improving, so it’s more likely the Fed will raise interest rates.

In the next part of this series, we’ll analyze US weekly crude oil inventories for the week ended March 24, 2017.

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