Consumers Preparing for Recession Despite Rising Optimism

The number of consumers who said they are feeling better about the economy has risen for the second month, but most are still getting ready for a possible recession, according to the University of Michigan.

The University of Michigan's consumer sentiment index, which measures Americans' views on the economy, hit 64.9, a rise of 8.7% from the month before, and the current economic conditions index rose by 15.2% from December.

"Consumer sentiment confirmed the preliminary January reading, remaining low from a historical perspective but continuing to lift for the second consecutive month," Joanne Hsu, the surveys of consumers director for the University of Michigan, said in a statement released with the report.

"While the short-run economic outlook was relatively unchanged from last month, all other components of the index increased in January," she continued.

However, the survey also found that "there are considerable downside risks to sentiment, with two-thirds of consumers expecting an economic downturn during the next year."

One reason is the potential debt ceiling crisis, with Hsu noting that "past debt ceiling crises in 2011 and 2013 prompted steep declines in consumer confidence."

Hsu concluded, "Consumers continued to exhibit considerable uncertainty over both long- and short-term inflation expectations, indicating the tentative nature of any declines."

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