Consumer sentiment at 13-month high

Lowering inflation helped give a boost to consumer sentiment in early February.

Overall consumer sentiment rose to 66.4, the highest reading since January 2022, according to the University of Michigan’s Surveys of Consumers preliminary February reading. It was up from 64.9 in the prior month. 

Economists polled by Reuters had forecast a preliminary reading for February of 65.0.

“After three consecutive months of increases, sentiment is now 6% above a year ago but still 14% below two years ago, prior to the current inflationary episode,” stated Joanne Hsu, director, surveys of consumers.

The survey's measure of current economic conditions increased to a reading of 72.6 in early February from 68.4 in January. The gauge of consumer expectations dipped to 62.3 from a reading of 62.7 last month.

Inflation

Year-ahead inflation expectations rebounded to 4.2%, from 3.9% in January and 4.4% in December. Long-run inflation expectations remained at 2.9% for the third straight month and stayed within the narrow 2.9-3.1% range for 18 of the last 19 months.

Uncertainty over short-run inflation expectations ticked up recently and continues to be notably elevated, noted Hsu, indicating the potential for continued volatility in expected year-ahead inflation.

“In contrast, uncertainty over long-run inflation receded in recent months, though the uncertainty stands well above averages over the last 20 years,” she said.

Overall, high prices continue to weigh on consumers despite the recent moderation in inflation, and sentiment remains more than 22% below its historical average since 1978.

“Combined with concerns over rising unemployment on the horizon, consumers are poised to exercise greater caution with their spending in the months ahead,” Hsu said.

[Read More: Core retail sales rise in January in every category]

The Surveys of Consumers is a rotating panel survey based on a nationally representative sample that gives each household in the coterminous U.S. an equal probability of being selected. Interviews are conducted throughout the month by telephone.