consumer sentiment index

Consumer sentiment is being driven by low interest rates

Eric Garland Economic trends Leave a Comment

The University of Michigan’s consumer sentiment index for August is out, and it tells a tale of people pretty confident in the status quo. Perhaps that might be due to the low cost of getting into debt.

…long term inflation expectations fell to the lowest level ever recorded, with near term inflation expectations anchored to that same low level. Just as low inflation has provided strong support for real income gains, low interest rates have increasingly become the sole driver of large discretionary expenditures.

The megabanks drive their strategies assuming the low time-cost of money. Consumers in turn gorge on credit. Hey, buying all the house you can comes back into vogue.

Sentiment may be up, but my curiosity is piqued. Nothing gets me more skeptical than the notion of a “New Normal.”