The US Dollar has been displayig some bullish momentum in March and it is likely to continue higher in April, as the economic data from the US shows an upbeat economy, while Europe and the UK, as well as other places such as China are still having major trouble. On Friday we received some positive data from he US such as a stable PCE number which leaned slightly to the downside, while the UoM Consumer Sentiment showed a decent improvement, after last eek’s soft consumer confidence figures.

The final UMich consumer sentiment index for March exceeded expectations, coming in at 79.4 points. This marks the highest level since July 2021 and represents an increase from both the preliminary reading of 76.5 points in March and the final reading of 76.9 points in February.

Key Components of UMich Consumer Sentiment

• Current conditions index: 82.5 points, higher than the preliminary reading of 79.4 points.
• Expectations index: 77.4 points, compared to the preliminary reading of 74.6 points.
• One-year inflation expectations: 2.9%, matching the lowest level since December 2020.
• Five-year inflation expectations: 2.8%, slightly lower than the preliminary reading of 2.9%.

The characterization of the UMich consumer sentiment report as a “goldilocks” scenario suggests that it reflects a favorable balance between economic strength and moderate inflation. However, the commentator expresses skepticism regarding the reliability of the report, suggesting that it may be influenced more by political factors than by economic fundamentals.

The recent PCE core number of +0.261% has already exerted downward pressure on the inflation forecast. However, it’s anticipated that inflation will remain high, with a monthly rate of 0.33%, implying yearly inflation of 4%. The inflation report highlights significant increases in healthcare costs, raising questions about whether these are one-time occurrences or if they will persist as they impact multiple providers over time.

On the other hand, there has been some positive disinflation observed in vehicle and grocery prices. The key question is whether this disinflationary trend will continue or if it will be outweighed by the persistent inflation observed in healthcare and auto repair costs.

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