University Of Michigan Reports Consumer Sentiment Recovery In January

Consumers are feeling better about the economy for the second month, according to The University of Michigan’s closely watched Consumer Sentiment Index, which measured 64.9 for January, up slightly from the preliminary reading of 64.6 earlier this month and up from 59.7 in December.

The current Economic Conditions Index jumped to 68.4 in January, up from 59.4 in December, with improved assessments of both personal finances and buying conditions for durables, supported by strong incomes and easing price pressure.

The indicator of consumer expectations for the next six months rose to 62.7 in January from 59.9 in December.

Inflation expectations for the year ahead receded for the fourth straight month, falling to 3.9 percent in January from 4.4 percent in December. (According to the latest government figures, inflation declined to 6.5 percent in December compared with a year earlier. It was the sixth straight year-over-year slowdown, down from 7.1 percent in November.)

“The current reading is the lowest since April 2021 but remains well above the 2.3 to 3.0 percent range seen in the two years prior to the pandemic,” stated Joanne Hsu, director of surveys.

Long-run inflation expectations, however, remained at 2.9 percent, again staying within the narrow 2.9 to 3.1 percent range for 17 of the last 18 months and remained elevated relative to the 2.2 to 2.6 percent range seen in the two years pre-pandemic.

“Consumers continued to exhibit considerable uncertainty over both long- and short-term inflation expectations, indicating the tentative nature of any declines,” Hsu continued.

Hue noted there are considerable downside risks to sentiment. Notably, the debt ceiling debate looms ahead and could reverse the gains seen over the last several months.

“Past debt ceiling crises in 2011 and 2013 prompted steep declines in consumer confidence,” she said.

The University Of Michigan’s survey of consumers is a rotating panel survey based on a nationally representative sample that gives each household in the U.S. an equal probability of being selected. Interviews are conducted throughout the month by telephone.