The final January University of Michigan Index of Consumer Sentiment at 64.9 (consensus 64.6) slightly improved from the preliminary reading of 64.6. The final reading for December was 59.7. A year ago, in January 2022, the index stood at 67.2. The report reflects some of the improved reports we have seen in new and pending home sales, mortgage applications and GDP. consumer sentiment has picked up from a despairing trough. Easing inflation is a big factor, given that is front and center of MSN and Fed chatter. Note that two-thirds of consumers expect an economic downturn during the next year.
US consumer sentiment and inflation expectations data from the University of Michigan
- US Univ. Of Michigan Sentiment Jan F: 64.9 (est 64.6; prev 64.6)
- Current Conditions: 68.4 (est 68.6; prev 68.6) The final reading for December was 59.4. In the same period a year ago, the index stood at 72.0.
- Expectations: 62.7 (est 62.0; prev 62.0) The final reading for December was 59.9. In the same period a year ago, the index stood at 64.1.
- 1-Year Inflation: 3.9% (est 4.0%; prev 4.0%) The final reading of 4.4% for December. The current reading is the lowest since April 2021.
- 5-10 Year Inflation: 2.9% (est 3.0%; prev 3.0%) Unchanged from the final reading of 2.9% for December.
The headline was close to expectations, but the market is likely going to react to the inflation expectations numbers. The dip there will offer some comfort to the Fed as it looks to combat rising prices. That emphasizes the credibility of the Fed (along with falling gas prices) and gives them some breathing room.
Home prices and real estate stability are massive factors for the AMerican consumer. The report reflects some of the improved reports we have seen in new and pending home sales, mortgage applications. The accompanying chart shows we are near 40-year lows for sentiment to buy a house. Improved in affordability would help an improvement here.
That said, there are considerable downside risks to sentiment, with two-thirds of consumers expecting an economic downturn during the next year. 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.
Surveys of Consumers Director Joanne Hsu
Source: University of Michigan
From The TradersCommunity News Desk