The University of Michigan Consumer Sentiment Index (MCSI) closed April 2022 at 65.2, up by 9.8% from late March, according to final results released on April 29, 2022. However, this was down from 65.7 in early April.
Most of the improvement versus March was based on improved expectations about the future. These included a gain of 21.6% in the year-ahead outlook for the economy and an 18.3% rise in personal financial expectations. A key driver of these results, in turn, was a sharp drop in expectations about gasoline prices, falling to an anticipated increase of just 0.4 cents from 49.6 cents in March.
- The Michigan Consumer Sentiment Index (MCSI) ended April 2022 up from March.
- However, it was down slightly from the preliminary reading in early April.
- A key driver was expectations that gasoline prices have stabilized.
- Still, February, March, and April 2022 recorded the three lowest readings for the MCSI in the past decade.
- High levels of uncertainty and lack of confidence in government policies are behind the depressed levels of sentiment.
'Impact of Uncertainty'
While up by 9.8% versus March, the MCSI closed April 2022 down by 26.2% year over year (YOY). Also, apart from its readings in February and March, it is still lower than in any prior month in the past decade.
Richard Curtin, chief economist of the Surveys of Consumers, commented: "The downward slide in confidence represents the impact of uncertainty ... Who would not be apprehensive about future conditions, even if on balance they anticipated a continued expansion?"
Curtin observes that this climate of uncertainty began with the COVID-19 pandemic and was reinforced by rising inflation and higher interest rates, offsetting the positive impacts of a strong labor market and rising wages. Additional uncertainties have arisen, including growing U.S. military support for Ukraine and supply chain disruptions related to a new COVID-19 crisis in China.
Low Confidence in Government Policies
A recurring theme in MCSI surveys for several months has been low confidence in government economic policies among respondents. Curtin writes: "Monetary policy now aims at tempering the strong labor market and trimming wage gains, the only factors that now support optimism. The goal of a soft landing will be more difficult to achieve."
Curtin indicates that further improvements in consumer sentiment are likely to depend on maintaining a strong labor market and continued wage gains. However, he warns, "The cost of that renewed strength is an accelerating wage-price spiral."
Related Indexes Up From March, Down Sharply YOY
The MCSI final report for April 2022 also included Michigan's Current Economic Conditions Index and Index of Consumer Expectations. The Current Economic Conditions Index was up by 3.3% from March 2022 but down by 28.6% from April 2021. The Index of Consumer Expectations rose by 15.1% from March but was down by 24.4% from the previous April.