Consumer sentiment in the U.S. has improved much more than expected in the month of January, according to preliminary data released by the University of Michigan on Friday.
The University of Michigan said its consumer sentiment index jumped to 64.6 in January from 59.7 in December. Economists had expected the index to inch up to 60.5.
With the much bigger than expected increase, the consumer sentiment index reached its highest level since hitting 65.2 in April 2022.
“Consumer sentiment remained low from a historical perspective but continued lifting for the second consecutive month, rising 8% above December and reaching about 4% below a year ago,” said Surveys of Consumers Director Joanne Hsu.
The jump by the headline index partly reflected a significant improvement in consumers’ assessment of current conditions, with the current economic conditions index surging to 68.6 in January from 59.4 in December.
The index of consumer expectations showed a more modest increase, rising to 62.0 in January from 59.9 in December, as the short-run economic outlook fell modestly but the long-run outlook saw a notable improvement.
The report also showed a continued decrease in one-year inflation expectations, which tumbled to 4.0 percent in January from 4.4 percent in December, falling for the fourth straight month.
“The current reading is the lowest since April 2021 but remains well above the 2.3-3.0% range seen in the two years prior to the pandemic,” said Hsu.
Meanwhile, five-year inflation expectations crept up to 3.0 percent in January from 2.9 percent in December, staying within the narrow 2.9-3.1 percent range for 17 of the last 18 months.
Hsu noted, “Uncertainty over both inflation expectations measures remains high, and changes in global factors in the months ahead may generate a reversal in recent improvements.”
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