US consumers see brighter days ahead as inflation fears tumble
Send a link to a friend
[December 09, 2023] (Reuters)
-U.S. consumer sentiment perked up much more than expected in December,
snapping four straight months of declines, as households saw inflation
pressures easing, a development likely to be welcomed by Federal Reserve
officials, a survey showed on Friday.
The University of Michigan's preliminary reading of its Consumer
Sentiment Index shot up to 69.4, the highest since August, from
November's final reading of 61.3.
The median expectation among economists in a Reuters poll had been for
the index to edge up to 62.0.
"Consumer sentiment soared 13% in December, erasing all declines from
the previous four months, primarily on the basis of improvements in the
expected trajectory of inflation," survey Director Joanne Hsu said in a
statement.
The survey's preliminary gauge of current conditions rose to 74.0 from
last month's final level of 68.3, while the expectations index climbed
to 66.4, the highest since July, from 56.8 in November.
Consumers' outlook for inflation in the year ahead plunged to 3.1% - the
lowest since March 2021 - from November's final expectation of 4.5%. The
1.4 percentage point decline was the largest monthly drop in one-year
inflation expectations in 22 years.
![](http://archives.lincolndailynews.com/2023/Dec/09/images/ads/current/xamis_sda_HFH_2023.png)
Over a five-year horizon, consumers expect inflation to average a
three-month low of 2.8%, down from 3.2% in November, which had been the
highest since March 2011, when it reached the same level.
Officials at the Fed, who have raised interest rates by 5.25 percentage
points since March 2022 to lower inflation from four-decade highs, keep
close tabs on consumers' attitudes about price trends.
They are keen to see inflation expectations trend lower so as not to
alter consumption behavior that could reverse the gains they have made
in slowing the pace of price increases.
[to top of second column] |
![](../images/120923PIX/busine45.jpg)
A shopper checks out at a Walmart store in Secaucus, New Jersey,
November 11, 2015. REUTERS/Lucas Jackson/File Photo
![](http://archives.lincolndailynews.com/2023/Dec/09/images/ads/current/werth_lda_HFH_2023.png)
The Fed meets next week for the last time this year and is expected
to leave rates unchanged at 5.25% to 5.50% amid growing evidence
that inflation pressures are subsiding.
Prices rose by 3.0% in the 12 months through October by the measure
the central bank uses to set its inflation target of 2%. That is
down from a peak in June 2022 of 7.1% and was the lowest since March
2021.
Thanks largely to persistent inflation, American households have
held a broadly sour view of the U.S. economy and their own prospects
ever since the COVID-19 pandemic struck in early 2020, even though
overall employment is back to record highs, jobless rates are near
historic lows, wages have been rising faster than before the health
crisis, and overall economic growth has been running well above
trend.
Researchers at the Federal Reserve Bank of Chicago recently examined
this historic disconnect between strong labor market conditions and
consumer and business sentiment.
"While part of these gaps appears to be driven by newly persistent
pessimism after the COVID-19 recession in the U.S., consumer and
small business sentiment are also clearly not reacting to strong
labor market conditions in the same manner that they used to,"
research authors Jacob Herbstman and Scott Brave wrote.
(Reporting By Dan Burns; Editing by Mark Porter, Nick Zieminski and
Marguerita Choy)
[© 2023 Thomson Reuters. All rights
reserved.]
This material may not be published,
broadcast, rewritten or redistributed.
Thompson Reuters is solely responsible for this content. |