The economy has been a matter of discrepancy for much of 2023. The data and relevant reports show an economy that on paper is improving; unemployment is low (about 3.7% as of the last jobs report), and the Federal Reserve hasn’t raised interest rates in the last few months, a sign of slowing inflation. However, many polls simultaneously show that most Americans believe the economy is in a bad place.
Well, data and anecdotes might finally be starting to align. The latest report on consumer sentiment from the University of Michigan came in at 69.4, a substantive increase both month-over-month (61.3 in November 2023) and year-over-year (59.8 in December 2022). This early December report was the first increase in five months—a complete reversal of the last four months of declines.
Professor Joanna Hsu, director of consumer surveys at the University of Michigan, said the following about the latest report:
“Overall, consumers feel more confident about the economy than they did over the past few months, which will likely provide some support to spending despite a modestly weakening labor market. (Nevertheless), consumers still feel pinched by high prices.”
Since the UMich index is one of the economic measures favored by the Fed, these more positive feelings may translate into material consequences as the Fed considers whether to raise interest rates again.
Joseph Brusuelas, chief economist of consulting firm RSM US LLP, said on X (formerly Twitter): “I would wage consumer sentiment roughly one year from now will be much higher.”
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