Economic Report: U.S. consumer sentiment showing gradual improvement, UMich survey shows
The numbers: The University of Michigan’s gauge of consumer sentiment rose slightly to a final December reading of 70.6 from the initial reading of 70.4, staying above November’s final level of 67.4.
Economists surveyed by The Wall Street Journal had forecast an unchanged reading of 70.4.
Key details: Short-run inflation expectations remained elevated at 4.8% in December, down slightly from 4.9% in November.
Longer-run inflation expectations remain tame at 2.9%.
Big picture: Sentiment has treaded water since it dipped sharply in August. Sentiment was as high as 88.3 in April.
However, the early date for the survey meant that it didn’t capture the rapid spread of the omicron variant since around Dec. 19.
What UMich said: “The uptick was primarily due to significant gains among households with incomes in the bottom third of the distribution. Indeed, the bottom third expected their incomes to rise during the year ahead by 2.8%, up from 1.8% last December, and the highest level since 2.9% was recorded in 1999,” said Richard Curtin, the UMich survey’s chief economist.
“The announced increase in Social Security payments of 5.9% in 2022 was partly responsible for the gain, and 5.0% increases in expected wage among the youngest workers. Importantly, too few interviews were conducted to capture the impact of the rapid spread of the Omicron variant in the U.S.”
What economists are saying: “One telling note in the latest report: ‘buying conditions for homes, vehicles, and household durables posted slight gains in December due to lessening resistance to price increases, except for vehicles.’ The Fed should be very concerned about that,” said Stephen Stanley, chief economist at Amherst Pierpont.
Market reaction: Stocks DJIA, +0.57% SPX, +0.68% traded higher on Thursday on optimism the omicron variant won’t derail the U.S. economy.