US Consumer Sentiment Hits Six-Month High as Inflation Fears Ease
US consumer sentiment unexpectedly climbed to its highest level in six months this February. This rise was largely driven by wealthier Americans who have seen significant gains in the stock market.
According to the University of Michigan’s preliminary February index, sentiment rose to 57.3, up from 56.4 in January. This surpassed the expectations of economists, who had predicted a reading of 55.
Cooling Inflation Expectations
The report brought good news regarding inflation. Consumers now expect prices to rise by 3.5% over the next 12 months—the lowest short-term inflation outlook in a year. While short-term fears are easing, long-term inflation expectations did see a slight increase.
A Growing Gap in Confidence
While sentiment is soaring for people with stock investments, confidence remains low for those without them. During the survey period, the S&P 500 was near record highs. This helped push the “current financial situation” score to a four-month high for asset owners.
Joanne Hsu, the director of the survey, noted that while soaring asset values help those who own them, these benefits are not being felt by everyone else.
Concerns Over the Job Market
Despite the overall boost in sentiment, many Americans are worried about their jobs. Respondents reported the highest fear of job loss since July 2020.
Recent data supports these concerns, showing a labor market that is struggling to stay strong:
- Fewer Job Openings: Vacancies in December fell to their lowest level since 2020.
- Slow Hiring: Private-sector payrolls grew by only 22,000 last month.
- Job Cuts: Companies announced more layoffs this January than any other January since 2009.
Spending Habits and Current Conditions
The “current conditions” index reached a four-month high of 58.3. Additionally, more people felt that now is a good time to buy big-ticket items, like appliances or cars, marking the best outlook for durable goods since October.
However, spending patterns are split. Wealthier, more confident consumers are driving most of the total spending. Meanwhile, lower-income households—who are feeling less confident—are becoming much more cautious with their money.
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