U.S. consumer sentiment increased in January to an eight-month high, indicating sustained optimism in the face of the coronavirus and the impeachment trial.
The University of Michigan’s sentiment index for January rose to 99.8, up from 99.3 in December and compared with a preliminary reading of 99.1, data showed Friday. The gain reflected a six-month high in expectations.
- Elevated optimism suggests consumers, through their spending, will remain the economy’s key source of strength. At the same time, household outlays moderated in the final three months of 2019 after posting the best consecutive quarters of growth since early 2015.
- Improving finances were reported by 53% of all consumers in January, equal to the 2018 and 2019 averages that were the best two years in the past half century.
- The measure of Americans’ expectations for inflation in five years to a decade climbed to 2.5% from a record-low 2.2%. The Federal Reserve closely monitors this measure, and policy makers have signaled they will hold interest rates steady following last year’s three cuts in part to keep price gains rising toward their 2% goal.
- The Michigan measure of sentiment follows Bloomberg’s weekly consumer comfort index, which has climbed to a 20- year high.
- Consumer expectations for inflation in the coming year rose to 2.5% from 2.3% in the prior month.
- The Michigan gauge of current economic conditions eased to 114.4 from a December reading of 115.5.
- A measure of buying conditions for household durable goods was little changed at 163 in January after 164 a month earlier.
“The resilience of consumers is remarkable and due to record low unemployment, record gains in income and wealth, as well as near record lows in inflation and interest rates,” Richard Curtin, director of the University of Michigan consumer survey, said in a statement.
"Importantly, the stability of positive levels of optimism during the past three years has favored a type of automatic information processing that acts to minimize the critical scrutiny given to ongoing events.”
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