Consumer sentiment improved slightly in December, increasing from a decade low in November as concerns about gasoline and energy prices eased somewhat, according to the University of Michigan’s consumer survey released on Friday.
The headline consumer sentiment index rose to 70.4 on the month from 67.4 previously, and only 0.1 higher than August when the delta variant’s surge hit the United States.
Seventy-six percent of the surveyed respondents selected inflation as the most serious problem facing the nation while only 21% selected unemployment.
Despite that, inflation expectations for the next 12 months and for five to 10 years remained at 4.9% and 3% respectively, the same levels as in November.
The survey, though, was conducted before data on inflation came out on Friday, which showed a nearly 40-year high in the inflation rate year over year of 6.8%. We should expect some significant revision in the headline number and inflation expectations in the final release of the survey at the end of December.
Because the data is sensitive to gasoline and energy prices—which have been volatile in recent months—and to inflation in general, we anticipate that the headline consumer sentiment number will continue to fluctuate yet stay below the average level of the summer, when the economy reopened on a broad scale.
The impact of the omicron variant remains a concern, which may affect energy prices, inflation and the overall sentiments in some similar fashion as the delta variant did.