The final University of Michigan Consumer Sentiment Index increased from a December reading of 99.3 to January’s level of 99.8. When the preliminary January index score was reported earlier this month, the index reflected a slight decline to 99.1. Economists polled by Bloomberg were expecting a final January reading of 99.1.
The final index reading in January of last year was 91.2. The 9.4% year-over-year increase was due primarily to record low unemployment, record gains in income and wealth, and near-record lows in inflation and interest rates.
The survey’s chief economist, Richard Curtin, commented, “The maintenance of consumer sentiment near cyclical peak levels is surprising given the overall slow pace of economic growth, which was accompanied in January by renewed military engagements in the Mideast, an impeachment trial in the Senate, and a fast spreading coronavirus.”
Curtin continued, “Gains in personal finances were reported by 53% of all consumers in January, exactly equal to the 2018 and 2019 averages–the highest two years in the past half century. Combined net changes in household income and wealth were cited in 40% of all mentions in January, comparable to the 1966 and 2000 peaks.”
The consumer expectations subindex rose by 1.6 points month over month, from 88.9 to 90.5 (up 1.8%), while the current conditions subindex decreased from 115.5 to 114.4 (down 1%).
Year over year, the current conditions subindex improved by 5.1% and the consumer expectations subindex rose by 1.8%.
In the final January report, Curtin noted that inflation expectations declined: “The data currently point toward consumer spending maintaining positive growth in the economy as a whole. Nonetheless, as the presidential primaries begin, consumers will have to evaluate the impact on their own finances from the range of fundamental changes in tax and spending programs advocated by the various candidates.”
While U.S. consumers remain mostly optimistic about the economy, there remain many places in the United States where the American Dream is dead.
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