UMich Inflation Expectations Plunge, Democrat Sentiment Sinks

The most important aspect of the University of Michigan sentiment survey continues to be the inflation expectations and it plunged to 3.90% (for the next year) – the lowest since April 2021…

Source: Bloomberg

As a reminder, consumers continued to exhibit considerable uncertainty over both long and short-term inflation expectations, indicating the tentative nature of any declines.

Consumer sentiment confirmed the preliminary January reading, remaining low from a historical perspective but continuing to lift for the second consecutive month, rising 9% above December and reaching about 3% below a year ago.

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

The current conditions index soared 15% above December, with improving assessments of both personal finances and buying conditions for durables, supported by strong incomes and easing price pressures.

Source: Bloomberg

Buying (and selling) conditions for homes remain a disaster…

Finally, we note that while Republicans and Independents have seen sentiment improve, Democrats sentiment slipped lower in January…

Finally, as Survey Director Joanne Hsu notes: “there are considerable downside risks to sentiment, with two-thirds of consumers expecting an economic downturn during the next year. Notably, the debt ceiling debate looms ahead and could reverse the gains seen over the last several months; past debt ceiling crises in 2011 and 2013 prompted steep declines in consumer confidence.”