University of Michigan Preliminary Consumer Sentiment Index Increases for December

The University of Michigan has released (12-9-22) the preliminary results of its Consumer Sentiment Index for December. The Index of Consumer Sentiment rose to a reading of 59.1 in December, up from 56.8 in November. This is a month-over-month increase of 4.0% but down 16.3% year-over-year (70.6 in December 2021).

The Current Economic Conditions increased to a reading of 60.2 in December, up from 58.8 in November. This is a month-over-month improvement of 2.4% but down 18.9% year-over-year (74.2 in December 2021).

The Index of Consumer Expectations rose to a reading of 58.4 in December, up from 55.6 in November. This is a month-over-month increase of 5.0% but down 14.5% year-over-year (68.3 in December 2021).

In remarks and analysis prepared to accompany the release of the preliminary results for December, Dr. Joanne Hsu, Director of Surveys for the University of Michigan, said:

“Consumer sentiment rose 4% above November, recovering most of the losses from November but remaining low from a historical perspective. All components of the index lifted, with one-year business conditions surging 14% and long-term business conditions increasing a more modest 6%. Gains in the sentiment index were seen across multiple demographic groups, with particularly large increases for higher-income families and those with larger stock holdings, supported by recent rises in financial markets. Sentiment for Democrats and Independents rose 12% and 7%, respectively, while for Republicans it fell 6%. Throughout the survey, concerns over high prices—which remain high relative to just prior to this current inflationary episode—have eased modestly.

Year-ahead inflation expectations improved considerably but remained relatively high, falling from 4.9% to 4.6% in December, the lowest reading in 15 months but still well above 2 years ago. Declines in short-run inflation expectations were visible across the distribution of age, income, education, as well as political party identification. At 3.0%, long run inflation expectations have stayed within the narrow (albeit elevated) 2.9-3.1% range for 16 of the last 17 months.”