U.S. Consumer Sentiment Cools for a Second MonthBy
Consumer sentiment in the U.S. cooled for a second month while remaining around levels consistent with a steady economy and solid job market, according to a University of Michigan report Friday.
Highlights of Michigan Sentiment (December, preliminary)
Even with the decline in the main index and a higher inflation outlook, Americans remain relatively optimistic about employment prospects and the economic outlook, with the report showing improved household finances.
Upbeat moods help to underpin consumer spending, the biggest part of the economy. Buying conditions for vehicles and household durables benefited from favorable prices and discounts, while the outlook for home buying remained favorable on low mortgage rates and greater income security.
Half of consumers expected economic growth to slow over the next five years, though partisanship heavily influenced the outcome. Three-quarters of Democrats forecast a downturn over the longer term, while almost three-quarters of Republicans expected continuous growth.
Six in 10 consumers said economic growth had recently improved in early December, and unemployment was expected to continue falling slightly. Employers added 228,000 jobs in November, above the median economist estimate of 195,000, and the jobless rate remained at almost a 17-year low of 4.1 percent, according to Labor Department data released earlier on Friday.
“Perhaps the most important changes in early December were higher income expectations as well as a higher expected inflation rate in the year-ahead,” Richard Curtin, director of the University of Michigan consumer survey, said in a statement. “The rise in inflation expectations in early December was a surprise.”
“Inflation needs close monitoring in the months ahead, but right now I think the most likely result will be this rise to 2.8 percent will be an anomaly and it will soon disappear,” Curtin said on a Bloomberg-hosted call following publication of the report.
- Inflation rate over next five to 10 years seen at 2.5 percent after 2.4 percent
- About 52 percent of respondents said their finances had recently improved, exceeding the average of 50 percent for 2017
- Twenty-nine percent of respondents spontaneously mentioned tax legislation when asked to identify what economic news they had recently heard; 14 percent thought the proposals would have a positive impact, 11 percent said it would be negative, and 5 percent were unsure
- Fewer consumers anticipated interest rates to rise in the coming year
— With assistance by Alexandre Tanzi, and Kristy Scheuble