US consumer sentiment reached its highest level in seven months, while year-ahead inflation expectations saw a notable rise to the highest reading in six months, based on preliminary results from the University of Michigan's Surveys of Consumers released on Friday. The primary sentiment gauge increased to 74 in December from 71.8 the previous month, marking a consecutive fifth month of improvement.
Analysts had anticipated a 73.2 figure in a survey compiled by Bloomberg. On an annualized basis, this measurement is up 6.2%, the survey indicates. The index for current economic conditions soared nearly 22% sequentially to 77.7, driven by a "surge" in buying conditions for durable goods, as noted by Surveys of Consumers Director Joanne Hsu.
"Rather than signalling strength, this momentum in durables was predominantly influenced by a belief that acquiring these items now would help buyers sidestep future price hikes." On the contrary, the expectations measure dipped 6.9% to 71.6 in December, continuing a post-election "recalibration" that commenced last month when President-elect Donald Trump triumphed over Kamala Harris in the 2024 election, as per the survey. Inflation expectations for the coming year leaped to 2.9% this month from 2.6% in November, while the five-year price growth outlook eased slightly to 3.1% from 3.2%, according to the survey findings. Democrats express concerns that anticipated policy shifts, particularly tariff hikes, under the incoming Trump administration might lead to a "resurgence" in inflation— a sentiment countered by Republicans, as highlighted in the survey. "National metrics of sentiment and expectations continue to mirror the collective economic experiences and observations of the American populace at large," Hsu emphasized..