University of Michigan Reports Preliminary Results of Its Consumer Sentiment Index for February

The University of Michigan on Friday (2-10-23) released the preliminary results of its Consumer Sentiment Index for February:

• The Index of Consumer Sentiment rose to a reading of 66.4 in February, up from 64.9 in January. This is a month-over-month increase of 2.3% and up 5.7% year-over-year (62.8 in February 2022).
• The Current Economic Conditions increased to a reading of 72.6 in February, up from 68.4 in January. This is a month-over-month improvement of 6.1% and up 6.5% year-over-year (68.2 in February 2022).
• The Index of Consumer Expectations declined to a reading of 62.3 in February, down from its reading of 62.7 in January. This is a month-over-month decline of 0.6% but up 4.9% year-over-year (59.4 in February 2022).

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

“Consumer sentiment was essentially unchanged at 1.5 index points above January. Recent developments in the economy, both positive and negative, have led to mixed attitudes among consumers with little net change in February. After three consecutive months of increases, sentiment is now 6% above a year ago but still 14% below two years ago, prior to the current inflationary episode. Overall, high prices continue to weigh on consumers despite the recent moderation in inflation, and sentiment remains more than 22% below its historical average since 1978. Combined with concerns over rising unemployment on the horizon, consumers are poised to exercise greater caution with their spending in the months ahead.

Year-ahead inflation expectations rebounded to 4.2% this month, from 3.9% in January and 4.4% in December. Long-run inflation expectations remained at 2.9% for the third straight month and stayed within the narrow 2.9–3.1% range for 18 of the last 19 months. Uncertainty over short-run inflation expectations ticked up recently and continues to be notably elevated, indicating the potential for continued volatility in expected year-ahead inflation. In contrast, uncertainty over long-run inflation receded in recent months, though the uncertainty stands well above averages over the last 20 years.”