Consumer Sentiment Rebounds in Early April 2022

The University of Michigan Consumer Sentiment Index (MCSI) opened April 2022 at 65.7, up by 10.6% from late March, according to preliminary results released on April 14, 2022. Key drivers were a leap of 29.4% in the year-ahead outlook for the economy and a 17.2% jump in personal financial expectations.

However, the MSCI remained below January's reading and lower than in any prior month in the past decade. The preliminary value of 65.7 for April 2022 puts the MCSI 25.6% below its final reading of 88.3 in April 2021.

Strong Labor Market

A strong labor market contributed to optimistic wage expectations among respondents under age 45. Anticipated wage growth of 5.3% was the largest expected gain in more than three decades, since April 1990. Consumers still expect that the national unemployment rate will move downward, acting to improve consumers' outlook for the national economy.

Gas Prices Expected to Stabilize

The MCSI report indicates that the most surprising change among respondents was that they anticipated a year-ahead increase in gas prices of just 0.4 cents in April, versus their view in March that the increase would be 49.6 cents. Retail gas prices have fallen since a peak in March, and that fact appears to have been recognized by consumers. The shift in gas price expectations may be partly due to the Biden administration's release of strategic oil reserves and the relaxing of some seasonal EPA rules.

'Still Significant Sources of Economic Uncertainty'

Richard Curtin, chief economist for the Surveys of Consumers, cautioned: "Nonetheless, the April survey offers only tentative evidence of small gains in sentiment, which is still too close to recession lows to be reassuring. There are still significant sources of economic uncertainty that could easily reverse the April gains, including the impact on the domestic economy from Putin's war, and the potential impact of new COVID variants."

Related Indexes Up From March, Down Sharply YOY

The MCSI preliminary 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 1.3% from March 2022 but down by 29.9% from April 2021. The Index of Consumer Expectations rose by 18.0% from March but was down by 22.5% from the previous April.