The latest US Consumer Survey by Morgan Stanley indicated a significant rise in consumer confidence, the broker’s analysts highlighted in a Monday client note.
Meanwhile, there was a slight decline in the inclination to spend on consumer electronics, particularly among high-income groups. Traditionally, spending trends tend to mirror overall sentiment, suggesting a potential increase in hardware expenditure come February.
According to the survey, the sentiment in the US “is broadly improving to start the year” as consumers turn increasingly optimistic about their household financial situation and less bearish on the country’s economic outlook.
The note says sentiment is “up 5 points vs. our late November '23 survey,” marking a 5-month high, Morgan Stanley wrote.
“We would point out that the improvement in sentiment in January '24 was driven by nearly every income cohort, with only high-income earners showing a bit more mixed sentiment in January,” analysts said in a note.
This progress follows the uptrend seen in the University of Michigan Consumer Sentiment Index, which has reached its highest level since Summer 2021. Simultaneously, Morgan Stanley's High Income Consumer Variable Index (MSHICV) has also embarked on an upward trajectory, rising 15% from its summer 2022 low.
This positive shift is significant given the strong correlation (approximately 0.70) between MSHICV and global consumer hardware spending, suggesting an improved outlook for the US consumer.
“As a result, we'd conclude that the health of the US consumer appears better than feared, though some negatively still lingers on the health of the economy,” the note says.
Consequently, an increase in consumer confidence is expected to boost hardware spending plans in the coming month, analysts noted. However, the key factor for sustained improvement in this sentiment lies in its consistency.
“Therefore, because of the broad-based uptick in consumer sentiment in January '24, we'd expect to see an improvement in consumer electronics purchase intentions next month,” the team said.