The numbers: Americans are still upbeat about the economy heading into the holiday shopping season despite big ups and downs in the stock market and rising U.S. interest rates, a survey of consumers shows.
The University of Michigan’s consumer-sentiment index fell slightly to 98.3 in November from 98.6 in October, according to a preliminary reading. That was in line with the MarketWatch forecast.
Still, the index has averaged 98.4 through the first months of the year — the highest level since 2000.
What happened: Americans think the strong economy will continue to produce more new jobs and somewhat improved incomes, but they also expect higher interest rates and inflation.
Younger people are hopeful that wages and incomes will continue to rise, though older Americans fret about an erosion in their standard of living due to higher inflation. On the other hand, the elderly will also benefit from better returns on their savings because of higher interest rates.
Altogether it was a wash.
The 2018 elections, meanwhile, didn’t appear to have much impact on consumers.
Perhaps the biggest surprise was how nonplussed Americans were by a sharp drop in stock prices in late October. It’s possible the recent rebound on Wall Street ameliorated some of the worry.
Big picture: The consumer sentiment survey is the latest in a batch of reports that suggest the economy will end 2018 on a high note. The economy could grow 3% this year for the first time since 2005, propelled by higher consumer spending, increased business investment and more government spending.
What they are saying? “Little changed, but a mixed bag: higher income and job expectations, increased expectations of inflation and interest rates,” noted chief economist Scott Brown of Raymond James.
Market reaction: The Dow Jones Industrial Average
and S&P 500
fell in Friday trades. Stocks soared earlier in the week after the 2018 elections that split power between Democrats and Republicans, but they’ve struggled for traction the past two days.
The 10-year Treasury yield
continued to creep higher and sat near 3.21%, just short of a seven-year high. Yields have been rising in anticipation of higher U.S. interest rates.