According to the University of Michigan consumer sentiment index the US economy remains in good stead. The index in September topped 100, only the third time since 2004. Noteworthy is that the bottom third of households had an index of 96.3, the highest level since November 2000. All households reported very optimistic expectations for improved personal finances in the year ahead. Despite the positive outlook, the most important negative was the impact of the expected tariffs will have on the economy. One third of those surveyed anticipated that the tariffs would curtail economic growth substantially and they are expected to boost inflation well beyond the Fed’s 2% line. According to the Michigan survey “those that voiced negative views of tariffs also held much less favorable prospects for the economy and held inflation expectations that were 0.6 of a percentage point higher than those who didn’t mention tariffs.”

What has not been stated in the report is the fact that the economy is nearing the end of its expansion cycle. We may get that conclusion in the October report (due out October 12). The stock market does not yet signal that development either. Once we get a significant stock market decline it will be clear that the economy has begun to turn.