Consumers Feel More Optimistic Into 2023

Consumers kicked off the new year feeling more optimistic about the US economy, according to preliminary results from the University of Michigan’s consumer survey.

The consumer sentiment index rose to 64.6 in the first two weeks of January, rising 8% from the previous reading of 59.7 for December and coming ahead of estimates for 60.4.

Year-ahead inflation expectations retreated for the fourth straight month, falling to 4.0% in January from 4.4% in December. The current reading is the lowest since April 2021 but remains 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%, again staying within the narrow 2.9-3.1% range for 17 of the last 18 months. Long-run inflation expectations remain elevated relative to the 2.2-2.6% range seen in the two years pre-pandemic. Uncertainty over both inflation expectations measures remains high, and changes in global factors in the months ahead may generate a reversal in recent improvements.