Consumer Sentiment Rose 2.6% to 99.3 in December

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Consumer Sentiment Rose 2.6% to 99.3 in December

Ann Arbor, MI, December 20, 2019-Consumer sentiment rose 2.6% to 99.3, according to final results from the University of Michigan Survey of Consumers.

This represents a 1.0% increase year over year. 

“The Sentiment Index remained largely unchanged in late December at the same very favorable level recorded at mid-month,” says Survey of Consumers chief economist Richard Curtin. “Most of the December gain was among upper income households, with those in the top third of the income distribution gaining 7.5% from last month and those in the bottom two-thirds posting a gain of just 0.8%. The recent shift favoring higher income households is in the opposite direction when compared with all-time peaks in the late 1990's. The impeachment hearing had a barely noticeable impact on economic expectations, as it was mentioned by just 2% of all consumers in the December survey. 

“Inflation expectations declined in the December survey, with both the year-ahead and five-year expected inflation rates falling. For the year-ahead, an annual inflation rate of 2.3% was expected, the lowest since 2.2% was recorded twice, in December 2016 and September 2010 prior to the Great Recession's lows. Over the next five years, consumers expected an annual inflation rate of just 2.2% in December 2019, the lowest level since this question was first introduced in the late 1970s. 

“It is of some interest to compare the two best extended periods of optimism in the history of the surveys, both of which included an impeachment: the four years from 1997 to 2000, when the Sentiment Index averaged 105.3, and the three years from 2017 to 2019 when the Index averaged 97.0 (see the Chart). On average, the 2017-2019 Index was 92% of the earlier period. Surprisingly, for the bottom 10% in the income distribution, the Index was 96% of the earlier period, while the top 10% the Index was just 89% of the earlier period. There was little difference across income thirds: 93% for the lowest third to 91% for the highest.”