Consumer sentiment barely budged in February despite robust hiring and job openings in January and benign inflation readings for December. Expectations for inflation over the next year, however, moved up.
The University of Michigan’s consumer sentiment index moved up to 66.4 from 64.9, an uptick that the survey’s director described as “essentially unchanged.” Economists had forecast a smaller increase to around 65.
“Recent developments in the economy, both positive and negative, have led to mixed attitudes among consumers with little net change in February,” said survey director Joanne Hsu.
Hsu pointed out that consumer sentiment is 14 percent below where it was two years ago, when President Joe Biden came into the White House. This week, Biden attempted to put a positive spin on his economic record during the annual State of the Union address but surveys show Americans are broadly unhappy with the state of the U.S. economy.
There has been some improvement in sentiment. The University of Michigan index is six percent above where it was a year ago. Compared with the long-term historical average, however, sentiment is down 22 percent, according to Hsu.
The current conditions barometer showed improvement while the expectations gauge worsened.
“Overall, high prices continue to weigh on consumers despite the recent moderation in inflation, and sentiment remains more than 22 percent 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.
Year-ahead inflation expectations rebounded to 4.2 percent in February, up from 3.9 percent in January but below the 4.4 percent recorded in December. Long-run expectations were unchanged at 2.9 percent. Hsu noted that consumers expressed high degrees of uncertainty around inflation forecasts.