University of Michigan Reports Upbeat Preliminary Results of Its Consumer Sentiment Index for December

The University of Michigan on Friday (12-08-23) released the preliminary results of its Surveys of Consumers for December.

• The Index of Consumer Sentiment increased to a reading of 69.4 in December, up from 61.3 in November. This is a month-over-month increase of 13.2% and up 16.1% year-over-year (59.8 in December 2022).
• Current Economic Conditions rose to a reading of 74.0 in December, up from 68.3 in November. This is a month-over-month increase of 8.3% and up 24.2% year-over-year (59.6 in December 2022).
• The Index of Consumer Expectations climbed to a reading of 66.4 in December, up from 56.8 in November. This is a month-over-month increase of 16.9% and up 10.7% year-over-year (56.8 in December 2022).

In remarks prepared to accompany the release of the preliminary December results, Surveys of Consumers Director Joanne Hsu said:

“Consumer sentiment soared 13% in December, erasing all declines from the previous four months, primarily on the basis of improvements in the expected trajectory of inflation. Sentiment is now about 39% above the all-time low measured in June of 2022 but still well below pre-pandemic levels. All five index components rose this month, led by surges of over 24% for both the short and long-run outlook for business conditions. There was a broad consensus of improved sentiment across age, income, education, geography, and political identification. A growing share of consumers—about 14%—spontaneously mentioned the potential impact of next year’s elections. Sentiment for these consumers appears to incorporate expectations that the elections will likely yield results favorable to the economy.

Year-ahead inflation expectations plunged from 4.5% last month to 3.1% this month. The current reading is the lowest since March 2021 and sits just above the 2.3–3.0% range seen in the two years prior to the pandemic. Long-run inflation expectations fell from 3.2% last month to 2.8% this month, matching the second lowest reading seen since July 2021. Long-run inflation expectations remain elevated relative to the 2.2–2.6% range seen in the two years pre-pandemic.”