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

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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

Consumer Sentiment Statistical Noise: Modern Day Snake Oil

Hooray! On March 17, the widely-followed University of Michigan Consumer Sentiment Index hit a 17-year high.

PPI Shows No Price Traction: Dear Econoday Parrot

The Producer Price Index (PPI) was up 0.1% month over month and 2.0% year over year, the latter down from 2.4%. The Econoday parrot was not happy.

CPI Hits Consensus, Disappoints Inflation-Loving Parrots

The BLS reports the CPI for All Items rose 0.2% in April as shelter, energy, and food indexes all increase. The 0.2% increase was in line with the Econoday Consensus estimate, but the Econoday parrot was not happy.

Consumer Sentiment Lowest Since 2012, Consumer Confidence Highest Since 2000

The University of Michigan Consumer Sentiment Index took a plunge today. The Conference Board's measure is at highs.

Too Hot to Handle Twist: Econoday “Thankful” for Empire State Manufacturing Cooling

The Econoday consensus estimate for the Empire State manufacturing index was +15.0 in a range of 13.0 to 17.2.

Nowcast, GDPNow Diverge Widely Again: What Happened?

After converging, the gap between the GDPNow Model forecast and the FRBNY Nowcast model has widened again.

Consumer Spending Expectations Rise at Median-to-High End

Consumer spending expectations have bounced a bit since the beginning of the year at the median level and at the high end. Despite the bounce, none of the trendlines have turned up.

Industrial Production Rebounds after GM Strike Ends

With GM back in swing, Industrial production rose 1.1% after two dismal months.

Thud: Housing Starts Plunge 6.8% as Sentiment Soars

Unless housing starts data is another one-time affair, and it could be given the volatile nature of housing starts, this recovery is nearly over just as sentiment is peaking.