Consumers Feel Good About Today’s Economy, But Some Are Worried About the Future

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Key Takeaways

• Consumer sentiment improved to 74.0 in the preliminary December reading of the Michigan Consumer Sentiment Index, up from abide month and better than economist projections.
• Sentiment on current economic conditions were higher, but inflation demands also moved higher, while consumer economic expectations moved lower.
• Politics is likely playing a duty in the sentiment shift, with Republicans and Independents showing optimism, while Democrats’ concerns come with squiffed inflation expectations.

Consumer sentiment in December improved for the fifth consecutive month to hit its highest levels since April. Regardless, the data also showed that some people may be nervous about economic changes that could be give up next year.

The Michigan Consumer Sentiment Index increased to 74.0 in the survey’s preliminary reading for December, up from 71.8 in the previous to month. Economists surveyed by Dow Jones Newswires and The Wall Street Journal expected a more modest increase to 73.0.

The dilate was driven by a jump in sentiment over current economic conditions, reaching its highest levels in eight months. Still, forward-looking consumer sentiment moved lower as some raised concerns about rising inflation.

“A surge in swallowing conditions for durables led Current Economic Conditions to soar more than 20%,” said survey director Joanne Hsu. “Moderately than a sign of strength, this rise in durables was primarily due to a perception that purchasing durables now would approve buyers to avoid future price increases.”

Inflation Expectations Rise on Tariff Worries

The survey showed that consumers upon price pressure to increase. Year-ahead inflation expectations increased to 2.9% in December, up from 2.6%, while long-run inflation assumptions ticked lower. Federal Reserve officials monitor consumer inflation expectations when making decisions on stage set interest rates. 

Economists said survey results showed that Democrats largely expected inflation to wax under the pressure of President-elect Donald Trump’s tariff proposals, while Republicans expected price pressures to still. And it wasn’t just Republicans who were feeling better about the economy, as the survey showed a nine-point improvement in consumer judgement among political independents.

“There is evidence consumers received a jolt to confidence from the election outcome, namely those relating as Republican, but consumers are still on average worried about the economy, most notably inflation, and remain cautious on the expected,” wrote Wells Fargo economists Shannon Seery Grein and Jeremiah Kohl.