The final University of Michigan Consumer Sentiment Index for December rose month over month from a November reading of 96.8 to December’s level of 99.3. When the preliminary December index score was reported earlier this month, the index reflected a slightly smaller increase to 99.2. Economists polled by Bloomberg were expecting a final December reading of 99.5.

The year-over-year final index reading in December of last year was 98.3. The 1% year-over-year increase was primarily due to continued confidence in future income.

The survey’s chief economist, Richard Curtin, commented, “Most of the December gain was among upper income households, with those in the top third of the income distribution gaining 7.5% from last month and those in the bottom two-thirds posting a gain of just 0.8%. The recent shift favoring higher income households is in the opposite direction when compared with all-time peaks in the late 1990’s.”

Curtin continued, “The impeachment hearing had a barely noticeable impact on economic expectations, as it was mentioned by just 2% of all consumers in the December survey.”

The month-over-month consumer expectations subindex rose by 2.6 points from 87.3 to 88.9 (up 3.5%), while the current conditions subindex increased from 111.6 to 115.5 (up 3.5%).

Year over year, the current conditions subindex slipped by 0.5% and the consumer expectations subindex rose by 2.2%.

In the final December report, Curtin noted that inflation expectations declined: “For the year ahead, an annual inflation rate of 2.3% was expected, the lowest since 2.2% was recorded twice, in December 2016 and September 2010 prior to the Great Recession’s lows. Over the next five years, consumers expected an annual inflation rate of just 2.2% …, the lowest level since this question was first introduced in the late 1970s.”

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