University of Michigan index of consumer sentiment falls in January

The University of Michigan index of consumer confidence dropped in the month of January, showed the preliminary figures. The preliminary estimate for January indicated that the consumer sentiment fell from 95.9 to 94.4. The miss relative to the projections were driven from a lower-than-expected reading on the current conditions index, which dropped 4.6 points to 109.2. This was also the main subcomponent that drove the overall index lower, noted Barclays in a research report.

Delving into details, the buying conditions for household durables have dropped to pre-holiday levels in January. This is probably because of less attractive pricing. In the meantime, buying conditions for other big-ticket items such as vehicles and homes also subdued in January, but stayed at elevated levels.

Meanwhile, the sub-index on consumer expectations rebounded a bit to 84.8, a rise of 0.5 points. The survey showed that 34 percent of all respondents mentioned tax reforms as a factor guiding their expectations, with 70 percent viewing it as positive, while 18 percent anticipated it to have a negative impact. In all, despite the fall in January, the index continues to be comfortably above its average in this recovery cycle.

“In our view, the index continues to signal strong consumer sentiment that is likely to be supportive of GDP growth in the coming months”, added Barclays.

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