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Consumer sentiment is at its highest levels since January 2004

The University of Michigan released numbers for consumer sentiment in November 2017 yesterday, part of the university’s Survey of Consumers. Consumer sentiment is a measure of how consumers are feeling about the economy overall and this can translate into higher amounts of spending in the economy. It is especially crucial going into the holiday season as retailers and delivery providers attempt to gauge the likelihood that consumers will want to purchase goods and services. This has direct implications for the USPS, as well as postal competitors such as FedEx and UPS, as willingness to spend translates into higher volumes of package delivery.

The index of consumer sentiment was 98.5 for November 2017, down 2.2 percent from October 2017 but an increase in 5.6 percent from November 2016. Consumer sentiment is at its highest levels since January 2004 despite relatively stagnant real wages and a slight decline in real earnings in October 2017. Consumers are most likely reacting to low official unemployment (4.1 percent in October 2017), increasing expectations for future employment, and persistently low inflation (inflation expectations are the lowest on record).

These numbers are very encouraging and signal an expected gain of 2.7 percent in real consumption expenditures in 2018, in addition to the best run-up to the holiday shopping season in a decade. This should have a beneficial effect on package volume for the USPS for the first quarter of 2018, boosting already bourgeoning package volume and revenue. Shipping and package volume increased 11.4 percent in FY 2017 and the resulting revenue increased 11.8 percent. Shipping and packages accounted for 28 percent of USPS operating revenue in FY 2017, a 27.3 percent increase since FY 2015, and amounted to 3.8 percent of total mail volume, and increase of 31 percent since FY 2015.

However, there are some factors which may cause consumer enthusiasm to pause. Given the length of the current expansion from the 2007-2009 recession, it is possible that the economy is nearing what economists call a cyclical peak, a high point of economic activity right before a recession. There are also significant fiscal and monetary policy actions looming, including the Republican tax plan and possible rate increases by the Federal Reserve in December. So far these potential policy changes have not affected consumer confidence.

Below is a table of results from November 2017 from the University of Michigan Survey Of Consumers: 

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