The University of Michigan reported that its consumer sentiment index climbed to 74.0 in December, up from 71.8 in November, surpassing economists’ expectations of a rise to 73.0. This marks the highest level since April, reflecting a positive shift in consumer outlook.
Joanne Hsu, Director of the University of Michigan’s Surveys of Consumers, observed that a significant increase in buying conditions for durables led to a more than 20% boost in current economic conditions, rising to 77.7 from November’s 63.9. Hsu noted, “This rise in durables was primarily due to a perception that purchasing durables now would enable buyers to avoid future price increases,” indicating an urgency driven by anticipated inflation rather than economic strength.
Conversely, the report pointed out a decline in the consumer expectations index, which fell to 71.6 from 76.9, hitting the lowest point since July. Hsu highlighted the political recalibration affecting these figures, stating, “The expectations index continued the post-election re-calibration that began last month, climbing for Republicans and declining for Democrats in December.”
The inflation outlook has also shifted. Year-ahead inflation expectations increased to 2.9% in December from 2.6% in November. While this marks the highest point in six months, it remains within the pre-pandemic range of 2.3-3.0%. In contrast, long-run inflation expectations slightly decreased to 3.1% from 3.2% the previous month, although they remain higher than pre-pandemic levels.
The improved sentiment in December suggests consumers are cautiously optimistic, though concerns about future inflation persist. These insights into consumer behavior and expectations highlight the delicate balance between optimism and economic uncertainty as the year-end approaches.
Source: FloridaRealtors
