Americans became less confident in the economy after Hurricane Harvey and Hurricane Irma swept across Florida and South Texas, according to the Survey of Consumers conducted by the University of Michigan.
The Index of Consumer Sentiment decreased to 95.3 in the first part of September. This is down 1.5% from 96.8 in August, but still up 4.5% from 91.2 in September last year.
“Consumer confidence edged downward in early September due to concerns over the outlook for the national economy,” Survey of Consumers Chief Economist Richard Curtin said. “Consumers’ assessments of current economic conditions improved, however, with the Current Conditions Index reaching the highest level since November of 2000.”
An article by Jill Mislinski for Advisor Perspectives explains what this means historically:
The Michigan average since its inception is 85.4. During non-recessionary years the average is 87.6. The average during the five recessions is 69.3.
Last month, Curtin explained Hurricane Harvey could impact consumer confidence in the months ahead. Now, it seems to play the greatest role in bringing down confidence among Americans.
“The two hurricanes had a greater impact on expected economic conditions,” Curtin said. “Across all interviews in early September, 9% spontaneously mentioned concerns that Harvey, Irma, or both, would have a negative impact on the overall economy.”
“Among those who mentioned the hurricanes, the Sentiment Index was 80.2, while among those who did not spontaneously mention either hurricane, the Sentiment Index remained unchanged from last month at 96.8,” he said. “Given the widespread devastation in Texas and Florida, it is not surprising to find these very negative initial reactions, nor would it be surprising if these negative assessments last longer than following most past hurricanes.”
The Current Economic Conditions index increased 2.7% from last month’s 110.9 to 113.9 and 9.3% from 104.2 last year.
The Index of Consumer Expectations, however, created the drag on confidence with its decrease of 4.9% from last month’s 87.7 to 83.4 in September. However, this is still up 0.8% from 82.7 last year.
“While consumers anticipated slight increases in gas prices and a slightly higher overall inflation rate, those concerns were neutralized by the best assessments of their financial situation in more than a decade,” Curtin said. “Renewed gains in incomes as well as rising home and equity values have acted to counterbalance the negative impacts from the hurricanes. Given the current resilience of consumers, recent events are unlikely to derail confidence.”