LANSING, Mich.–In a big turnaround, Americans are feeling pretty chipper about the economy as the new year gets underway.
Consumer sentiment leaped 29% since November, the biggest two-month increase since 1991, according to a survey by the University of Michigan. It’s a big turnaround from several years of high inflation that followed a pandemic, creating strong pessimism among the American public.
In the new University of Michigan Sentiment Index, consumer sentiment leapt 13% in the first half of January from December, the Michigan survey said, after a sharp rise the prior month.
“The pickup in sentiment was broad-based, spanning consumers of different age, income, education and geography,” according to the University of Michigan.
The recovery in sentiment “is likely to provide some positive momentum for the economy,” Joanne Hsu, the Michigan survey’s director, told the New York Times.
Still a Ways to Go
However, despite the recent sentiment gains, the measure is still about 20% lower than before the pandemic took hold in 2020 and “nearer to levels consistent with an economy just emerging from a downturn—not one that recorded surprisingly strong growth last year,” the report added.
For credit unions wondering how their members are thinking about the remainder of this year, the Times reminded that “a better mood among Americans is good for growth since happier consumers are, on balance, likely to keep spending—and that consumption drives around two-thirds of the U.S. economy.”
Additional Bright Spots
There have been other bright spots, as well, including:
- The share of consumers in December who expected to be financially better off a year later reached the highest level since June 2021, according to a Federal Reserve Bank of New York survey cited by the Times.
- A separate consumer confidence measure last month saw its biggest one-month gain since March 2021, according to the Conference Board.
- Consumers’ expectations for inflation a year ahead dropped to 2.9% in January, the lowest level since December 2020, and down from 4.5% in November, according to the Michigan survey.
- Fannie Mae’s index of home-buying sentiment jumped 10% in December from a year earlier. “That was driven in part by a surge in the share of consumers anticipating lower mortgage rates over the next year,” the Times stated.
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