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

On Friday (1-19-24), the University of Michigan released the preliminary results of its Surveys of Consumers for January.

• The Index of Consumer Sentiment increased to 78.8 in January, up from a reading of 69.7 in December. This is a month-over-month increase of 13.1% and up 21.4% year-over-year (64.9 in January 2023).
• Current Economic Conditions rose to 83.3 in January, up from a reading of 73.3 in December. This is a month-over-month increase of 13.6% and up 21.6% year-over-year (68.5 in January 2023).
• The Index of Consumer Expectations climbed to 75.9 in January, up from December’s reading of 67.4. This is a month-over-month increase of 12.6% and up 21.2% year-over-year (62.6 in January 2023).

In remarks and analysis prepared to accompany the release of the preliminary results for January, Surveys of Consumers Director Joanne Hsu said:

Consumer sentiment soared 13% in January to reach its highest level since July 2021, showing that the sharp increase in December was no fluke. Consumer views were supported by confidence that inflation has turned a corner and strengthening income expectations. Over the last two months, sentiment has climbed a cumulative 29%, the largest two-month increase since 1991 as a recession ended. For the second straight month, all five index components rose, with a 27% surge in the short-run outlook for business conditions and a 14% gain in current personal finances.

Like December, there was a broad consensus of improved sentiment across age, income, education, and geography. Democrats and Republicans alike showed their most favorable readings since summer of 2021. Sentiment has now risen nearly 60% above the all-time low measured in June of 2022 and is likely to provide some positive momentum for the economy. Sentiment is now just 7% shy of the historical average since 1978.

Year-ahead inflation expectations softened to 2.9% after plunging in December. The current reading is the lowest since December 2020 and is now within the 2.3–3.0% range seen in the two years prior to the pandemic. Long-run inflation expectations edged down to 2.8%, falling just below the 2.9–3.1% range seen for 26 of the last 30 months. These expectations remained slightly elevated relative to the 2.2–2.6% range seen in the two years pre-pandemic.