Consumer sentiment unexpectedly falls in February

U.S. consumer sentiment regarding expectations for the next six months fell to a six-month low in February as Americans — particularly lower-incomer consumers — grew more pessimistic about their financial outlook. 

The University of Michigan’s preliminary Consumer Sentiment Index fell to 76.2 in February from 79 last month. The index of current economic conditions edged down to 86.2 from 86.7 in January. But the index of consumer expectations — a measure of what consumers expect in six months — dropped to 69.8 from 74 last month, the weakest reading in six months.

The report noted that when consumers were asked to assess their current financial position, the deep divisions become apparent: Among those with incomes in the bottom third, just 23% reported improved finances, the lowest since 2014. In contrast, among those with incomes in the top third, 54% reported their finances had improved. Mentions of income gains fell to just 17% among those in the bottom third, compared with 44% in the top income third. 

“Households with incomes in the bottom third reported significant setbacks,” stated Richard Curtin, Surveys of Consumers, chief economist, University of Michigan. “Presumably a new round of stimulus payments will reduce these financial hardships.”

The proposed stimulus is expected to prompt a very strong pace of economic growth, with the differences mainly about the appropriate size and pace of federal spending, Curtain said.