A Sentiment Indicator Takes the Spotlight Today

This Friday, there’s really only one major event on the calendar that has the potential to move the markets:
The University of Michigan Consumer Sentiment report.

While the European session offers little of note – just a few minor releases that won’t influence market expectations – the focus clearly shifts to the U.S. session this afternoon. Here’s what’s on the agenda:

Building Permits & Housing Starts
Import Prices
University of Michigan Consumer Sentiment

Out of these three, it’s the Michigan Sentiment Index that stands out with the most potential to impact markets. Expectations point to a rise to 53.4, up from 52.2 previously.

Unlike the Conference Board Consumer Confidence Index, which is more labor-market focused, the Michigan survey places greater weight on consumers’ personal financial situations – making it a better predictor of consumer spending. That’s also why its expectations component is included in the Leading Economic Index (LEI).

This release tends to have the greatest market impact during turning points in the economic cycle or when we see a large surprise relative to expectations.

In recent months, sentiment has fallen sharply, largely due to the effects of Trump’s trade war.
What’s especially concerning is the rise in inflation expectations, particularly the long-term outlook, which recently hit its highest level since 1991.

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