University of Michigan Preliminary Consumer Sentiment Index Declined for February 2022

The University of Michigan today (Friday 2-11-22) released its preliminary Consumer Sentiment Index (CSI) for February. The Index of Consumer Sentiment declined to a reading of 61.7 in February, down from 67.2 in January. The decline is a month-over-month decrease of -8.2% and down -19.7% year-over-year (76.8 in February 2021).

The Current Economic Conditions dropped to a reading of 68.5 in February, down from 72.0 in January. This is a month-over-month decrease of -4.9% and down -20.5% year-over-year (86.2 in February 2021).

Finally, the Index of Consumer Expectations fell to a reading of 57.4% in February, down from 64.1 in January. This is a month-over-month decline of -10.5% and down -18.8 year-over-year (70.7 in February 2021).

In remarks and analysis prepared to accompany the release of the preliminary February 2022 CSI, Dr. Richard Curtain (Ph.D., Economics), Director of Surveys for the University of Michigan said:

“Sentiment continued its downward descent, reaching its worst level in a decade, falling a stunning 8.2% from last month and 19.7% from last February. The recent declines have been driven by weakening personal financial prospects, largely due to rising inflation, less confidence in the government’s economic policies, and the least favorable long term economic outlook in a decade. Importantly, the entire February decline was among households with incomes of $100,000 or more; their Sentiment Index fell by 16.1% from last month, and 27.5% from last year. The impact of higher inflation on personal finances was spontaneously cited by one-third of all consumers, with nearly half of all consumers expecting declines in their inflation adjusted incomes during the year ahead. In addition, fewer households cited rising net household wealth since the pandemic low in May 2020, largely due to the falling likelihood of stock price increases in 2022.”

“The recent declines have meant that the Sentiment Index now signals the onset of a sustained downturn in consumer spending. The depth of the slump, however, is subject to several caveats that have not been present in prior downturns: the impact of unspent stimulus funds, the partisan distortion of expectations, and the pandemic’s disruption of spending and work patterns. Households have amassed substantial savings and reserve funds from the stymies’ as well as due to more limited consumption choices, especially services. There may be a lessened need for additional precautionary savings and a greater desire to engage in discretionary spending.”