This post was originally published on this site
The numbers: A survey of consumer sentiment rose in early February to a 13-month high of 67, suggesting somewhat greater optimism about the economy among U.S. households.
The final reading in February was up from a preliminary 66.4 and from 64.9 in January, the University of Michigan said. The third straight gain pushed the index well above the record low of 50 set last summer.
Consumer sentiment is still far below normal levels, however. The survey’s most recent peak was 88.3 in April 2021, Before the pandemic it topped out at 101.
Inflation expectations, meanwhile, remained fairly high.
Consumer sentiment helps gauge how Americans feel about their own finances as well as the broader economy.
Key details: A gauge that measures what consumers think about the current state of the economy registered 70.7in Februar. That’s also the highest level in 13 months.
Optimism was highest from wealthier Americans with large stock holdings. The stock market had rebounded in January before pulling back at the end of February.
Another measure that asked about expectations for the next six months moved up to a 13-month peak of 64.7 vs. a 62.3 reading earlier in the month.
Americans think inflation will persist for some time. They expect the inflation rate in the next year to average about 4.1%.
In the longer run, consumers believe inflation will increase about 2.9% a year, well above the Federal Reserve’s 2% target.
Fed officials pay close attention to inflation expectations because they could be a harbinger of future price trends.
The current 12-month rate of inflation is 6.4%, based on the consumer-price index. It’s fallen from a 40-year peak of 9.1% last summer.
Big picture: High inflation and rising interest rates have dampened consumer spending since last summer, but Americans appear cautiously optimistic about the economy.
The chief source of hope is the strongest labor market in decades. Most people who want a job can find and layoffs remain near historic lows. That’s give households the confidence to spend.
Ebbing inflation, especially lower gas prices, has also offered encouragement.
The big question is whether the economy can sustain much higher interest rates as the Fed moves aggressively to chill stubbornly high inflation.
Market reaction: The Dow Jones Industrial Average
DJIA,
and S&P 500
SPX,
sank in Friday trades after an sharp increase in inflation in January.
