The HPS-CivicScience Economic Sentiment Index (“ESI”) is a “living” index that measures U.S. adults’ expectations for the economy going forward, as well as their feelings about current conditions for major purchases. The primary goal of the Index is to accurately measure movements in overall national economic sentiment and to provide a more sophisticated alternative to existing economic sentiment indices. Unlike other prominent indices that release consumer sentiment estimates infrequently, the HPS-CivicScience Index is updated in real time as responses are collected continuously every hour, every day. Large-scale cross-tabulation of survey responses and consumer attributes enable more granular analyses than are currently possible through prevailing measures.
Excerpt From the Latest Reading:
After a slight recovery, the HPS-CivicScience Economic Sentiment Index (ESI) dropped 1.8 points to a reading of 48.1. This is the ESI’s lowest level since November 15, 2016.
Of note, the University of Michigan’s January consumer confidence survey exhibited the same sharp drop to lows not seen since the 2016 election, a drop that was picked up by the ESI during its December reading. The University of Michigan index fell from 98.3 to 90.7 in January, dropping to its lowest level since October 2016.
The ESI’s drop in December coincided with steep declines in the stock market, which has improved in January. The smaller drop in consumer confidence this month occurs during a prolonged government shutdown in the United States, which has triggered declines in the past. Additionally, global fears of an economic slowdown, the failure in the United Kingdom to pass a final “Brexit” resolution, and continuing uncertainty about the future of trade policy continue to grab headlines.
Confidence fell across four of the five components of the ESI. Confidence in making a major purchase experienced the largest decline, falling by 4.0 points, to a year-over-year low of 44.5. Economic sentiment toward the broader U.S. economy also fell precipitously, dropping by 3.3 points to 42.4. Consumer confidence in their own financial situation also dropped, falling 1.6 points to a reading of 63.8. The only indicator to rise was confidence in the broader housing market which rose by 0.4 points, while labor market confidence fell slightly by 0.2 points.
Each of these three components is now between three and eight points below their 2018 averages.