FX.co ★ U.S. Consumer Sentiment Improves In Line With Preliminary Estimate In December

The University of Michigan released its consumer sentiment report on Friday, indicating that confidence in the U.S. economy aligned with preliminary December projections. According to the report, the consumer sentiment index for December maintained its preliminary estimate of 74.0, matching economists' predictions.

The index, which stood at 71.8 in November, ascended to its highest point since April, when it reached 77.2. Joanne Hsu, Director of Surveys of Consumers, observed, "Consumer sentiment has been rising for five consecutive months, achieving its peak since April 2024."

Hsu highlighted a notable 32% improvement in buying conditions, driven primarily by a spike in consumer expectations for future price hikes on large purchases.

The headline index rose this month, with the current economic conditions index jumping to a new eight-month high of 75.1 in December, up from 63.9 in November. Conversely, the consumer expectations index decreased to 73.3 in December from 76.9 in November, marking its lowest point since August. Hsu remarked, "December saw a continuation of the post-election recalibration begun last month, with expectations increasing among Republicans and decreasing among Democrats."

The report further revealed that year-ahead inflation expectations increased to 2.8% in December from 2.6% in November, though slightly below the preliminary estimate of 2.9%. This marks the first month-over-month rise in inflation expectations since May, however, they remain within the 2.3-3.0% range observed in the two years prior to the pandemic.

Long-term inflation expectations dipped to 3.0% in December from 3.2% in November. Despite this decrease, Hsu pointed out that they remain somewhat elevated compared to the pre-pandemic range. She concluded, "Overall, consumers perceive a significant economic improvement as inflation has moderated, though they do not feel they are thriving. Current sentiment is approximately midway between the all-time low seen in June 2022 and pre-pandemic levels."