US consumer sentiment improves in December

US consumer sentiment improved in December as worries about inflation receded, according to a survey released on Friday by the University of Michigan.

The preliminary index of consumer sentiment ticked up to 69.4 from 61.3 in November and 59.8 in December 2022.

The current economic conditions index printed at 74.0 in December from 68.3 a month earlier and 59.6 in the same month a year earlier.

The index of consumer expectations was 66.4, up from 56.8 in November and 60.0 in December 2022.

Year-ahead inflation expectations plunged from 4.5% in November to 3.1% in December. This marked the lowest reading since March 2021 and sits just above the 2.3-3.0% range seen in the two years prior to the pandemic.

Long-run inflation expectations fell from 3.2% in November to 2.8% in December, matching the second lowest reading seen since July 2021.

Surveys of consumers director Joanne Hsu said: "Consumer sentiment soared 13% in December, erasing all declines from the previous four months, primarily on the basis of improvements in the expected trajectory of inflation.

"Sentiment is now about 39% above the all-time low measured in June of 2022 but still well below pre-pandemic levels. All five index components rose this month, led by surges of over 24% for both the short and long-run outlook for business conditions. There was a broad consensus of improved sentiment across age, income, education, geography, and political identification.

"A growing share of consumers - about 14 - spontaneously mentioned the potential impact of next year’s elections. Sentiment for these consumers appears to incorporate expectations that the elections will likely yield results favourable to the economy."