by Mish
After cooling in February and March, the consumer sentiment index is showing new strength. Preliminary April index is up 1.1 points to 98.0 which beats the Econoday consensus by 1 full point and Econoday’s high estimate by a 1/2 point.
Strength is centered in the current assessment, up 2 points to 115.2 which is a 17-year high. This offers a positive indication for April consumer spending. Expectations are also higher, up 4 tenths to 86.9 to signal confidence in the jobs outlook.
Despite the strength, inflation expectations are very subdued, unchanged at 2.5 percent for the 1-year outlook and unchanged at 2.4 percent for the 5-year.
The report notes that divergence in its sample between Republicans and Democrats has fully narrowed on the current assessment but remains unusually wide on expectations where Republicans see strength and Democrats weakness.
The 17-year high on the current conditions index, at a time when consumer spending is weak and GDP soft, is a reminder that high confidence readings have yet to translate to economic strength.
It would behoove the parrot to stop its expectation that spending will match sentiment because it hasn’t for over a decade.
Numerous people have discussed this setup including John Hussman, Jeff Snider from Alhambra Partners, and GubbmintCheese, the source of the following chart.
I discussed the relationship between spending and sentiment on July 28, 2015 in Sentiment Measures vs. Retail Spending: Clueless Clues and Random Noise.
On March 21, 2017, I expanded on Hussman’s Tweet regarding sentiment in Consumer Sentiment Statistical Noise: Modern Day Snake Oil.
Population Adjusted Retail Sales vs Consumer Sentiment Percent Change From Year Ago – Detail
On March 21, I asked Consumer Confidence Strongest Since December 2000: A Strong Contrarian Indicator?
Also see Hard-Boiled vs Soft-Boiled Economic Egg Debate: Cracking the Shells.
I believe all this squawking over various measures of consumer sentiment and other allegedly excellent “soft data” is a contrarian indicator.
The louder the squawks, and the more places they are heard, the stronger the contrarian indicator.
Mike “Mish” Shedlock
