Consumer sentiment increases in December

Consumer Sentiment was 59.1 in December, according to the University of Michigan Consumer Sentiment Index. December’s figure was 2.3 points above Novembers reading and is 11.5 points below the December 2021 index. The Current Economic Conditions Index rose 1.4 points from the previous month to 60.2 and is 14.0 points below the December 2021 index. The Consumer Expectations Index increased by 2.8 points to 58.4 and is 9.9 points lower from a year ago.

“Consumer sentiment rose 4% above November, recovering most of the losses from November but remaining low from a historical perspective. All components of the index lifted, with one-year business conditions surging 14% and long-term business conditions increasing a more modest 6%. Gains in the sentiment index were seen across multiple demographic groups, with particularly large increases for higher-income families and those with larger stock holdings, supported by recent rises in financial markets. Sentiment for Democrats and Independents rose 12% and 7%, respectively, while for Republicans it fell 6%. Throughout the survey, concerns over high prices—which remain high relative to just prior to this current inflationary episode—have eased modestly”- Joanne Hsu, Director of UM Surveys of Consumers.

Year-ahead inflation expectations improved considerably but remained relatively high, falling from 4.9% to 4.6% in December, the lowest reading in 15 months but still well above 2 years ago. Declines in short-run inflation expectations were visible across the distribution of age, income, education, as well as political party identification. At 3.0%, long run inflation expectations has stayed within the narrow (albeit elevated) 2.9-3.1% range for 16 of the last 17 months.

Read the University of Michigan Surveys of Consumers release.