Americans might finally be more optimistic about the U.S. economy in the face of falling inflation rates.
U.S. consumer sentiment surged in January from the previous month, by the largest margin since 2005 as the retreating inflation helped bolster views about the economy and household finances, according to a report from Bloomberg.
The University of Michigan’s final sentiment index for the month rose 9.3 points from December to 79, according to data issued Friday, Bloomberg reported. The preliminary January reading was 78.8.
Americans expect prices will climb at a 2.9% rate over the next year, compared with the 3.1% in the prior month. They see costs rising 2.9% over the next five to 10 years.
“After reserving judgment last fall about whether the slowdown in inflation would persist, consumers now feel assured that inflation will continue to soften,” Joanne Hsu, director of the survey, told Bloomberg in a statement.
The greatest level of confidence since July 2021 has the potential of sustaining household demand and keeping the economy on its expansion path. At the same time, declining inflation expectations may reassure Federal Reserve policymakers as they consider when to being reducing interest rates.
The Michigan sentiment report showed buying conditions for durable goods rose sharply in January. Consumers’ perceptions of their current financial situation and the outlook also picked up from the end of 2023.
The overall current conditions gauge increased to 81.9 from December’s 73.3. The January measure of expectations rose to 77.1 from 67.4 a month earlier.
