Consumer sentiment in the U.S. rose modestly in December, driven largely by improving attitudes among lower-income Americans and growing optimism about personal finances and future business conditions.
The University of Michigan reported Friday that its final sentiment index for December increased by 1.9 points from the previous month, landing at 52.9. While the gain was relatively small and within the survey’s margin of error, it reflected a subtle shift in consumer mood, particularly among households with lower incomes.
“Consumer sentiment confirmed its early month reading, inching up less than two index points from November, within the margin of error,” said Joanne Hsu, director of the survey. “While lower-income consumers posted gains, sentiment for higher-income consumers was little changed.”
Despite the overall improvement, consumers remain unhappy with the state of the current economy. The index measuring current conditions dipped to a near-record low of 50.2—down about 30% from where it stood in January. However, the component tracking future expectations hit a four-month high, suggesting that while Americans may be dissatisfied with the present, they are more hopeful about what’s ahead.
Interestingly, the pessimism has not translated into weaker spending. Data from the Commerce Department shows that retail spending remains strong. Retail sales through October were up 4% compared to the same period last year. Online shopping increased by 7.2%, and restaurant sales rose by 5.5%.
Inflation expectations, one of the key drivers of sentiment, continued to decline in December. Consumers now anticipate prices to rise by 4.2% over the next year, down from 4.5% in November. That marks the lowest level of short-term inflation expectations since February. For the longer term—five to ten years—expected inflation dropped to 3.2%, the lowest since January.
