2023 Consumer Sentiment Index Hits Highest Level Since July, Inflation Concerns Ease
In December 2023, consumer confidence surged to its highest point since mid-year, driven by reduced inflation expectations, according to the University of Michigan survey.
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Key Highlights
- December saw a sharp rise in the consumer sentiment index as inflation expectations declined.
- The University of Michigan’s survey recorded one-year inflation expectations dropping to 3.1%.
- All five components of the sentiment index increased, a rare occurrence seen in just 10% of readings since 1978.
Optimism about the inflation trajectory propelled the University of Michigan’s Consumer Sentiment Index (MCSI) to 69.7 in December 2023, marking a 13.7% gain from November and surpassing economists’ projections. This marked the first increase after four consecutive months of decline, fully recouping prior losses.
Survey Director Joanne Hsu noted that every component of the MCSI rose—an uncommon event reflected in only a tenth of past surveys since 1978.
The Consumer Expectations Index jumped 18.7% to 67.4, and the Current Economic Conditions measure rose 7.3% to 73.3.
The key driver behind the MCSI improvement was a more favorable outlook on inflation. Consumers now anticipate inflation will average 3.1% in one year, down significantly from 4.5% in November. The five-year inflation expectation also declined to 2.9% from 3.2%.
Hsu added that the MCSI is currently positioned just below the midpoint between pre-pandemic levels and the historic low recorded in June 2022.
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