The University of Michigan’s Consumer Sentiment Index shows that consumers are increasingly optimistic. At the end of the third quarter 2020, the Sentiment Index reached its highest level in six months, driven by a more positive outlook for the national economy.
“While consumers have anticipated gains in the national economy ever since the April shutdown, the September survey recorded a significant increase in the proportion that expected a reestablishment of good times financially in the overall economy,” according to Richard Curtin, chief economist for the university’s consumer surveys.
Curtain noted that the gains in consumer sentiment were largely due to upper income households. The economy will benefit from the increasing pace of spending among households with incomes in the top third.
Unfortunately, the data indicate that lower income households continued to face income and job losses when compared with the “modest” gain expected by upper income households. Curtain warned that without a renewed federal stimulus and enhanced unemployment payments, the income gap will widen.
The survey found that two non-economic issues still represent the primary source of uncertainty and could cause volatile shifts in consumer confidence: when and how the election is decided, and delays in obtaining a vaccine and its widespread availability.
“Although the survey was completed before the presidential debate, it is likely that the chaotic debate has already added to these uncertainties,” Curtain added.
Opinions about economic policies that would reduce inequality by raising taxes on the wealthy and a universal basic income were included in the September survey. Rather than focus on policy preferences, the questions focused on the impact of these policies on the overall economy.
Nearly half of all consumers (47%) thought higher taxes on the wealthy would have a favorable impact on economic growth prospects, and nearly half (48%) thought a universal basic income would have a negative impact on the economy.
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