Consumer sentiment rose in December

Consumer sentiment rose 8.1 points in December to 69.4, which is 9.6 points higher than a year ago. The Current Economic Conditions Index increased 5.7 points from the previous month to 74.0 and is 14.4 points above the December 2022 index. The Consumer Expectations Index increased 9.6 points to 66.4 from the last month and is 6.4 points higher than a year ago.

“Consumer sentiment soared 13% in December, erasing all declines from the previous four months, primarily on the basis of improvements in the expected trajectory of inflation. Sentiment is now about 39% above the all-time low measured in June of 2022 but still well below pre-pandemic levels. All five index components rose this month, led by surges of over 24% for both the short and long-run outlook for business conditions. There was a broad consensus of improved sentiment across age, income, education, geography, and political identification. A growing share of consumers—about 14%—spontaneously mentioned the potential impact of next year’s elections. Sentiment for these consumers appears to incorporate expectations that the elections will likely yield results favorable to the economy.”

“Year-ahead inflation expectations plunged from 4.5% last month to 3.1% this month. The current reading is the lowest since March 2021 and sits just above the 2.3-3.0% range seen in the two years prior to the pandemic. Long-run inflation expectations fell from 3.2% last month to 2.8% this month, matching the second lowest reading seen since July 2021. Long-run inflation expectations remain elevated relative to the 2.2-2.6% range seen in the two years pre-pandemic,” said University of Michigan Surveys of Consumers Director Joanne Hsu.

Read the University of Michigan Surveys of Consumers release.

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