Americans are feeling increasingly better about the state of the US economy.
The latest University of Michigan consumer sentiment survey released Friday revealed a 13% jump in overall sentiment during the month of January. The index reading for the month came in at 78.8, its highest mark since July 2021, and well above economist expectations for a reading of 70.1.
The cumulative 29% climb in the sentiment index over the past two months is the largest two-month increase since the US economy recovered from recession in 1991.
“The sharp increase in December was no fluke,” survey of consumers director Joanne Hsu said in a statement. “Consumer views were supported by confidence that inflation has turned a corner and strengthening income expectations.”
The move higher in sentiment comes as the Nasdaq 100 reached a new all-time high on Thursday and all three of the major stock averages sit near record levels. The equity rally has been driven by a shift from investors fearing further interest rate hikes to debating when the Federal Reserve’s first interest cut will come.
A so-called soft landing — where inflation returns the Fed’s 2% target without a sharp economic downturn — has become close to a consensus call to begin 2024 as economist have become increasingly confident in inflation’s path downward. This marks a stark reversal from the economic vibe at the start of 2023, when a recession was the consensus expectation.
Consumers are picking up on that trend, too. Year-ahead inflation expectations hit 2.9% in Friday’s report, the lowest level since December 2020. Longer-run inflation expectations fell to 2.8%, down from 2.9% the month prior.
“Although the poor relationship with consumption growth means the resurgence in confidence doesn’t necessarily tell us much about the economic outlook, with confidence rebounding and inflation expectations falling, this is another sign that the economy is on track for a soft landing,” Capital Economics deputy chief US economist Andrew Hunter wrote in a note to clients on Friday.
Josh Schafer is a reporter for Yahoo Finance.
Click here for the latest stock market news and in-depth analysis, including events that move stocks
Read the latest financial and business news from Yahoo Finance
Credit: Source link
