Consumer sentiment rose in January to the highest level since August 2021 as inflation concerns eased.
American consumers showed more confidence in the economy, both now and in the future, the University of Michigan reported on Friday.
The overall index increased to 78.8 from 69.7, much higher than the median consensus forecast of 70.1. Inflation expectations also declined, with the 12-month and the five- to 10-year expectations falling to 2.9% and 2.8%, respectively.
The sharp improvement in sentiment suggests continued resilience among consumers and should support more spending in the coming months.
All of the subindexes for spending plans showed strong increases In January, even for home buying.
Read more of RSM’s insights on the economy and the middle market.
The end of the Federal Reserve’s rate hikes and its signal that it would cut rates this year have helped home buyers’ sentiment, driven by lower mortgage rate in the past couple of weeks.
The survey’s respondents also viewed the government as doing a better job in fighting inflation as the subindex for confidence in the government rose to the highest level since late 2021.
Given how strong recent economic data has been, the data on sentiment should add more reason to expect a soft landing in the economy, especially when inflation expectations are well anchored.
