University of Michigan Preliminary Consumer Sentiment Index for April 2022 Posts Surprising Gain

The University of Michigan today (4-14-22) released its preliminary Consumer Sentiment Index (CSI) for April. The CSI increased to a reading of 65.7, up from the March reading of 59.4. This represents a month-over-month increase of 10.6% but is down -25.6% year-over-year (88.3 in April 2021).

The Current Economic Conditions increased to a reading of 68.1 in April, up from 67.2 in March. This is a month-over-month increase of 1.3% but down -29.9% year-over-year (97.2 in April 2021).

Finally, the Index of Consumer Expectations increased to a reading of 64.1 in April, up from 54.3% in March. This is a month-over-month increase of 18.0% but down -22.5% year-over-year (82.7 in April 2021).

In remarks and analysis prepared to accompany the release of the preliminary February 2022 CSI, Dr. Richard Curtain (Ph.D., Economics), Director of Surveys for the University of Michigan, said:

“Consumer Sentiment jumped by a surprising 10.6% in early April, although it remained below January’s reading and lower than in any prior month in the past decade. Nearly the entire gain was in the Expectations Index, which posted a monthly gain of 18.0%, including a leap of 29.4% in the year-ahead outlook for the economy and a 17.2% jump in personal financial expectations.

A strong labor market bolstered wage expectations among consumers under age 45 to 5.3%-the largest expected gain in more than three decades, since April 1990. Consumers still anticipate that the national unemployment rate will inch downward, acting to improve consumers’ outlook for the national economy.

Perhaps the most surprising change was that consumers anticipated a year-ahead increase in gas prices of just 0.4 cents in April, completely reversing March’s surge to 49.6 cents. Retail gas prices have fallen since the March peak, and that fact was immediately recognized by consumers. The shift in gas price expectations may be partly due to Biden’s announced release of strategic oil reserves and the relaxing of some seasonal EPA rules.

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.”

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