Consumer Sentiment Rose 4.9% to 80.7 in December

Ann Arbor, MI, December 23, 2020-Consumer sentiment rose 4.9% to 80.7 in December, according to final results from the University of Michigan Survey of Consumers.

This represents a 18.7% decline year over year. 

“The Sentiment Index slipped in late December, although it remained higher than last month despite the ongoing surge in covid infections and deaths,” according to chief economist Richard Curtin. “The improvement was due to a large and rapid partisan shift, with Democrats becoming much more positive and Republicans much more negative. The largest change was in long term business prospects, as twice as many Democrats as three months ago expected a continuous expansion over the next five years (54% up from 27%), while that same favorable expectation was nearly cut in half among Republicans (32% down from 60%). The pandemic has had a much greater relative impact on assessments of the overall economy than on assessments of consumers' current personal financial situations. Trends in how consumers evaluate their own finances and how they assess changes in the national economy have followed a close association over the past half century (see the chart). Since the start of the pandemic, however, a huge divide has grown across households in how they assess their own personal finances: the finances of those that continue to be employed and working at home have remained positive while those who have lost jobs and incomes have been quite negative. Growing inequalities have also been due to rising home and stock prices. In contrast, nearly everyone has reported negative assessments of current conditions in the national economy. This gap signifies the pandemic nature of the current downturn; the second largest gap occurred in the downturn surrounding 9/11. While the rollout of the vaccine has been greeted as the beginning of the end, the end of the pandemic is still on the distant horizon in terms of a return to normalcy for consumer behavior, even among the most favored households. Precautionary motives will continue to shape both economic and personal behavior.”