Consumer Confidence in January Reaches 12-Year High

Ann Arbor, MI, January 27, 2017—Consumer sentiment closed January at 98.5, rising 0.3% over December’s 98.2 rate.

“Consumers expressed a higher level of confidence January than any other time in the last dozen years,” says Survey of Consumers chief economist, Richard Curtin. “The post-election surge in confidence was driven by a more optimistic outlook for the economy and job growth during the year ahead as well as more favorable economic prospects over the next five years. Consumers also reported much more positive assessments of their current financial situation due to gains in both incomes and household wealth, and anticipated the most positive outlook for their personal finances in more than a decade. Consumers have become more convinced that the stronger economy would finally prompt the Fed to increase interest rates at a quicker pace, which caused one-in-five consumers to favor borrowing-in-advance of anticipated increases in mortgage rates, the highest level in more than twenty years. Overall, the post-election surge in consumer confidence was based on political promises, and not, as yet, on economic outcomes. Moreover, over the past half century the surveys have never recorded as dominant an impact of partisanship on economic expectations. When the same consumers were re-interviewed from six months ago, the survey recorded extreme swings based on political party affiliation, with Democrats becoming much more pessimistic and Republicans much more optimistic. Such divergences will ultimately converge since consumers hold economic expectations to be useful decision guides, which will require both sides to temper their extreme views.”