University of Michigan: Consumer sentiment improved this month

Consumer sentiment increased early this month, according to this month’s University of Michigan Surveys of Consumers. The increase — small enough to fall within the margin of error — was driven by more positive views among younger consumers..The index tracking consumer sentiment increased 4 1/2% to 53.3 from 51.0 in November, but was 28% lower than its year-ago reading of 74. The index measuring current economic conditions fell nearly 1% to 50.7 from 51.1 in November, and was 32.5% lower than its year-ago mark of 75.1. The index of consumer expectations increased nearly 8% to 55.0 from 51.0 the previous month, but was 25% lower than its year-ago reading of 73.3. According to the report, assessments of current economic conditions were unchanged, even as expectations strengthened for next year. Consumers were especially optimistic about their personal finances in the new year, with the related index rising 13% from November, higher across all major demographic groups. The index tracking expected personal finances was nearly 12% lower than the start of the year, according to the report. Labor market expectations increased but continued reflecting pessimism. “Consumers reported marginal improvement on several economic fronts, yet their broader outlook remains dour as many continue to feel the strain of elevated prices,” according to the report. Inflation expectations eased for the fourth straight month, with year-ahead expectations falling to 4.1% from 4.5% in November, its lowest mark since the start of the year. This month’s reading is still higher than 3.3% earlier this year. Long-term inflation expectations dropped to 3.2%, matching January’s level and on the upper end of 2024 readings, which ranged between 2.8% and 3.2%. Pre-pandemic expectations were under 2.8%.