UMich Sentiment Survey Soars In Early December, Inflation Outlook Plunges

After disappointingly dropping in November, analysts expected preliminary December sentiment data to extend its decline but instead – despite lockdowns spreading virally, jobless claims surging back, and no relief checks from Washington – UMich reports a huge jump from 76.9 to 81.4 for the headline sentiment index!

The rise was led by a spike in ‘current conditions’ to its highest since March, while a measure of expectations improved 4.2 points to 74.7.

Source: Bloomberg

Respondents’ outlook for the economy in the next five years climbed in early December by the most since May 2011…

Source: Bloomberg

The brighter sentiment likely reflects optimism around the imminent distribution of a vaccine, which is seen easing business restrictions and allowing many in-person activities to resume. Even so, the virus continues to spread unchecked, with record cases and deaths, while lawmakers remain at odds over a new aid package.

For the first time since Trump was elected, Democrats are more confident than Republicans…

Source: Bloomberg

Four years ago, UMich Director Richard Curtin wrote, in Consumer Economic Expectations: Persistent Partisan Differences, that the rise in partisanship reflected a basic underlying split in preferred economic policies.

While expressions of partisanship are often couched in raw animus, the primary and sustaining cause lies in differences about how to best provide for fair and equitable growth in income and wealth. Although policy disagreements have always existed, the broad societal agreement that existed in the past has been transformed by persistent cleavages in desired policies. The extreme partisan shifts following presidential elections simply reflect an expected switch in policies in one or the other direction. It will not be easy to reestablish common policy objectives with rampant animosity.

The longer it lasts, however, the greater the drain economic aspirations and motivations.

1-Year Inflation expectations collapsed…

Source: Bloomberg

Broadly speaking, the ‘soft’ survey data is accelerating down to the disappointingly not-v-shaped moves in ‘hard’ real data…

Source: Bloomberg

‘Hope’ is fading fast – and with lockdowns being imposed across the country at holiday-time, we suspect this will collapse soon without some more handouts from Washington, even with the vaccines.