Consumer Sentiment: Further Rebound As Inflation Eases

Bottom Line:  The preliminary reading of consumer sentiment from the University of Michigan's survey rose to a nine-month high as year-ahead inflation expectations fell to 4%, the lowest since April '21. While improving sharply, year-ahead inflation expectations remained well above the 2.3-3.0% range seen in the two years prior to the pandemic. Long-run inflation expectations were little changed from December at 3.0%, still elevated relative to the 2.2-2.6% pre-pandemic range. Moreover, the level of sentiment remains historically low. Consumers still face historic uncertainty, but they are slowly becoming less pessimistic as inflation eases and labor markets remain solid.

Consumer Sentiment ROSE by 4.9 points in early January to 64.6%, compared with market expectations for an increase to 60.7%. Sentiment was still 3.9% BELOW its year-ago level.

Current Conditions ROSE by 9.2 points to 68.6%. This was 4.7% BELOW the year-ago level.
 
Consumer Expectations ROSE by 2.1 points to 62.0%. Despite this month's modest increase, expectations were 3.3% BELOW their year-ago level.