Consumer sentiment is slowly improving but remains below the historical average, according to the University of Michigan’s January Surveys of Consumers report.
Sentiment increased eight percent this month from 59 to 64, which is still 4 percent below its year-ago mark of 67. Current assessments of personal finances increased 16 percent to its highest level in eight months as incomes rose and inflation eased. The index for consumer expectations increased by 3.5 percent, from 60 to 62.
“Although the short-run economic outlook fell modestly from December, the long-run outlook rose 7 percent to its highest level in nine months and is now 17 percent below its historical average,” noted Surveys of Consumers Director Joanne Hsu.
Year-ahead inflation expectations fell for the fourth straight month in January, from 4.4 percent to 4 percent. The current reading is the lowest since spring of 2021 but remains above the 2.3 percent to 3 percent range in the two years before the pandemic. Long-term inflation expectations remained at 3 percent this month, which remains relatively high compared to the 2.2 percent to 2.6 percent range in the two years before the 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,” Hsu said.