Retail sales in the eurozone unexpectedly inched lower in September, contrasting with some of the rosier sentiment among consumers in recent months.
Volumes fell back 0.1%, the same rate as in August, statistics agency Eurostat said Thursday. Economists polled by The Wall Street Journal had instead expected a 0.2% increase.
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Ed Frankl
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This is a developing story. Stay tuned for updates here.
The numbers: The University of Michigan’s gauge of consumer sentiment rose to a preliminary December reading of 69.4 from a six-month low of 61.3 in the prior month. This is the highest level since August.
Economists polled by the Wall Street Journal had expected a December reading of 62.4.
Expectations of inflation cooled in early December, according to the report.
Americans think inflation will average a 3.1% rate over the next year, down from 4.5% in the prior month. That’s the lowest level since March 2021.
Expectations for inflation over the next five years fell to 2.8% from 3.2% in November, which was the highest reading in over a decade.
Key details: According to the report, a gauge of consumers’ views on current conditions jumped to 74 in December from 68.3 in the prior month, while a barometer of their expectations of the future rose to 66.4 from 56.8.
Big picture: A lot of factors were behind the increase in confidence, with the solid job market and declining gasoline prices mentioned most often by economists. Stock prices have also been strong. Despite the gains, sentiment is still well below prepandemic levels.
Market reaction: Stocks
DJIA
SPX
were higher in early trading on Friday, while the 10-year Treasury yield
BX:TMUBMUSD10Y
rose to 4.21% after the solid job report was released earlier in the morning.
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By Ed Frankl
Consumer confidence in Germany weakened for the second consecutive month in data for October, as consumers prioritized more savings over spending amid a gloomy economic picture.
Germany’s forward-looking consumer-sentiment index forecasts confidence to fall to minus 26.5 in October, from minus 25.6 in September, according to data from market-research group GfK published Wednesday.
The reading misses expectations of minus 26.0, according to a consensus of economists polled by The Wall Street Journal.
However, GfK’s sub-indexes for the current month–September–showed improving expectations for the incomes and the economy, but consumers appeared to pivot more to boosting their savings over consumption.
“Although economic expectations have risen somewhat and both income expectations and the propensity to buy have shown minimal growth, the propensity to save has risen significantly, causing consumer sentiment to fall again,” GfK consumer expert Rolf Buerkl said.
The index recording propensity to save, which reflects consumers’ near-term concerns for the economy, rose to its highest level since April 2011, GfK said.
Persistently high inflation due to rising food and energy prices has dragged down consumer sentiment, and chances of a recovery there have “probably fallen to zero,” Buerkl said.
Key to improving domestic demand is falling inflation, Buerkl said, though he cautioned that it isn’t possible yet to determine when it can be brought down to the European Central Bank’s target of 2%.
The ECB raised rates by a quarter-point at its most recent meeting, likely further squeezing household incomes in the meantime.
Write to Ed Frankl at edward.frankl@wsj.com
The numbers: The index of U.S. consumer confidence dipped to 106.1 in August from a revised 114 in the prior month, the Conference Board said Tuesday.
Economists polled by The Wall Street Journal had forecast a modest pullback to 116 from the initial reading of 117, which was the highest level in two years.
The revised July reading was the highest since December 2021.
Key details: Part of the survey that tracks how consumers feel about current economic conditions fell to 114.8 this month from 153 in July.
A gauge that assesses what Americans expect over the next six months dropped to 80.2 from 88. The August reading is just above to 80 level that historically signals a recession within the next year.
Big picture: The tight labor market had bolstered confidence in June and July. The decline in August reverses all of those gains. The index is still 10.8 points above the recent cycle low in July 2022.
Economists think that higher gasoline prices were behind some of the decline in August. The price of a gallon of unleaded gasoline is up 19.6% from the start of the year and over 2% from last month.
What the Conference Board said: The organization said it still expects a recession before the end of the year.
“Write-in responses showed that consumers were once again preoccupied with rising prices in general, and for groceries and gasoline in particular,” said Dana Peterson, chief economist at The Conference Board.
What are they saying? “The August drop does not definitively end the upward trend in place since last summer, and the expectations index still points to faster growth in real consumption spending. We are not convinced, however, in part because some of the strength in July retail sales was due to boost from Amazon Prime Day, which won’t continue, and because near-real-time indicators of discretionary services spending paint a much less upbeat picture,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
Robert Frick, corporate economist with Navy Federal Credit Union, said he didn’t think confidence would rise significantly until inflation falls further.
Market reaction: Stocks
DJIA
SPX
were trading higher on Tuesday. The yield on the 10-year Treasury note
BX:TMUBMUSD10Y
fell to 4.16%.
By Ed Frankl
Consumer confidence in Germany weakened in data for September, reversing August’s improvement, reflecting gloomier income expectations and prospects for the country’s economy.
Germany’s forward-looking consumer-sentiment index forecasts confidence to tick down to minus 25.5 in September, from a revised minus 24.6 in August, according to data from market-research group GfK published Tuesday.
The reading is a little weaker than expectations of minus 25.0, according to a consensus of economists polled by The Wall Street Journal.
The worsening consumer confidence follows a weaker reading of business sentiment from the closely watched Ifo business-climate indicator, which last week fell for the fourth month in a row.
GfK uses three sub-indexes for the current month–August–to derive a sentiment figure for the coming month. Two of them–falling income expectations and a declining propensity to buy–drove the overall figure downward, according to GfK consumer expert Rolf Buerkl.
The continuing sharp rise in food and energy prices is weighing on purchasing power, GfK said, with inflation in July still high at 6.2%.
The chances that consumer sentiment will recover from its low level before the end of the year are dwindling more and more, Buerkl said.
“Persistently high inflation rates, especially for food and energy supplies, ensure that the consumer sentiment is currently not making any progress,” he added.
Consumers are also much more pessimistic about economic development in Germany, the survey’s authors said, with the indicator measuring economic development also suffering in August, reaching its weakest point in 2023.
Overall, private consumption is unlikely to make a positive contribution to economic development in 2023, and will instead be a burden on growth prospects, GfK said.
Write to Ed Frankl at edward.frankl@wsj.com
The numbers: A survey of consumer sentiment hung close a two-year high in August, but Americans expressed more worries about the future of the economy.
The final reading of the sentiment survey in August slipped to 69.5 from a preliminary 71.2, the University of Michigan said Friday. The index hit a 22-month high in July.
The consumer-sentiment survey reveals how consumers 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 75.7 at the end of August vs. an initial 77.4
A measure that asks about expectations for the next six months dropped to 65.5 from an initial 67.3 in early August and 68.3 in July.
Americans think inflation will average 3.5% in the next year, a few ticks higher compared to several months ago.
The official rate of inflation is 3.2%, using the consumer price index, though other measures suggest prices are rising somewhat faster.
Big picture: Steady economic growth, ultra-low unemployment and slowing inflation have made Americans less worried about a recession.
Yet interest rates are high and likely to remain so through next year as the Federal Reserve aims return the inflation genie to the bottle. Higher borrowing costs are all but certain to depress the economy and perhaps increase unemployment
Looking ahead: “Consumers perceive that the rapid improvements in the economy from the past three months have moderated, particularly with inflation, and they are tentative about the outlook ahead,” said Joanne Hsu, director of the survey.
Market reaction: The Dow Jones Industrial Average
DJIA,
and S&P 500
SPX,
rose in Friday trades.
The numbers: The University of Michigan’s gauge of consumer sentiment inched down to a preliminary August reading of 71.2 after hitting a 22-month high of 71.6 in the prior month.
Economists polled by the Wall Street Journal had expected sentiment to inch up to a 71.7 reading in August.
Another key part of the report is the U. of M. measure of inflation expectations.
According to the report, Americans’ expectations for overall inflation over the next year slipped to 3.3% in August from 3.4% in the prior month, while expectations for inflation over the next 5 years inched down to 2.9% from 3%.
Key details: According to the Michigan report, a gauge of U.S. consumers’ views on current conditions rose to to 77.4 in August from 76.6 in the prior month, while a barometer of their future expectations fell to 67.3 from 68.3.
Big picture: Sentiment has been boosted by waning recession fears and disinflation in grocery store prices.
What the University of Michigan said: “Consumer sentiment was essentially unchanged from July, with small offsetting increases and decreases within the index. In general, consumers perceived few material differences in the economic environment from last month, but they saw substantial improvements relative to just three months ago,” said Joanne Hsu, the director of University of Michigan consumer surveys.
Market reaction: Stocks
DJIA
SPX
were mixed in early trading Friday while the yield on the 10-year Treasury note
BX:TMUBMUSD10Y
rose to 4.12%, the highest level since the spike last week after Fitch Ratings downgraded the U.S. credit rating.
The numbers: A survey of consumer sentiment survey reached a 22-month high of 71.6 in July, helped by a slowdown in inflation and a robust jobs market.
The final reading of the sentiment survey slipped from a preliminary 72.6 in early July, but it was up sharply from 64.4 in June, the University of Michigan said Friday.
The consumer-sentiment survey reveals how consumers feel about their own finances as well as the broader economy.
Also read: U.S. inflation eases again, PCE shows. Prices rise at slowest pace in almost two years
The index has risen in fits and starts from an all-time low of 50 last year. The index rose to as high as 101 shortly before the onset of the pandemic in 2020.
Key details: A gauge that measures what consumers think about the current state of the economy registered 76.6 at the end of July vs. an initial 77.5.
A measure that asks about expectations for the next six months slipped to 68.3 from an initial 69.4 in early July.
Both indexes are up sharply from June, however.
Americans think inflation will average 3.4% in the next year.
Big picture: Americans are less worried about a recession. Unemployment is low, wages are rising and inflation has eased.
Yet the economy is likely to face more turbulence ahead because of higher interest rates orchestrated by the Federal Reserve to bring inflation down even further.
Higher borrowing costs usually depress business investment and consumer spending, increase layoffs and slow the economy.
Looking ahead: “Overall, the sharp rise in sentiment was largely attributable to the continued slowdown in inflation along with stability in labor markets,” said Joanne Hsu, director of the survey. “However, sentiment for lower-income consumers fell.”
Market reaction: The Dow Jones Industrial Average
DJIA,
and S&P 500
SPX,
rose in Friday trades.
The numbers: The University of Michigan’s gauge of consumer sentiment rose to a preliminary July reading of 72.6 from a June reading of 64.4. It is the largest gain since December 2005. Sentiment is at its highest level since September 2021.
Economists polled by the Wall Street Journal had expected a June reading of 65.5.
However, Americans’ expectations for overall inflation over the next year rose to 3.4% in July from 3.3% in the prior month. Expectations for inflation over the next 5 years ticked up to 3.1% from 3% in June.
Key details: According to the UMich report, a gauge of consumers’ views on current conditions jumped to 77.5 in July from 69 in the prior month, while a barometer of their expectations rose to 69.4 from 61.5.
Big picture: Sentiment is improving as gasoline prices have held steady this summer. Low unemployment is also playing a role.
What are they saying? “The good news is that sentiment has roughly retraced half of its fall from pre-pandemic levels. For most Americans, a modest gain in income is expected. Still, durable goods buying conditions remain far off their recent levels. The rise in confidence seems restrained, and clouds concern about the forecasted economic downturn which continues to linger,” said Scott Murray, economist at Nationwide, in a note to clients.
Market reaction: Stocks
DJIA,
SPX,
opened higher on Friday while the yield on the 10-year Treasury note
TMUBMUSD10Y,
rose to 3.81%.
By Ed Frankl
Consumer confidence in Germany worsened for the first time in nine months in July, reflecting a more uncertain climate for household spending, as the country’s economic outlook continues to be bleak after a recession in the winter.
Germany’s forward-looking consumer sentiment index forecasts confidence to tick down to minus 25.4 in July–the first decline since October 2022–from a revised minus 24.4 in June, according to data from market-research group GfK published Wednesday.
The reading upended expectations that the index would improve, to minus 23, according to a forecast from economists polled by The Wall Street Journal.
The news adds further gloom over expectations for the German economy, after June data last week showed the Ifo business-climate index fell for the second month in a row and the composite purchasing managers’ index dipped close to the 50-point mark that represents contraction.
The data, alongside rising interest rates and high inflation, could mean Germany is heading for a third quarter of negative growth, some economists say, after the economy contracted 0.5% in the fourth quarter of 2022, and 0.3% in the first of this year.
“The current development in consumer sentiment indicates that consumers are once again more uncertain,” GfK consumer expert Rolf Buerkl said.
The apprehension to spend was reflected in the indicator showing respondents’ propensity to save increased this month, he added.
GfK uses three sub-indexes for the current month–June–to derive a sentiment figure for the coming month. Both economic and income expectations declined, as households take into account that they will face real income losses this year, which won’t be fully offset by wage increases, GfK said.
However, the third measure, of propensity to buy, rose on the month, though it still remains at a low level, showing that consumption remains weak, according to GfK.
Moreover, private consumption likely won’t make any significant contribution to overall economic development in Germany this year, GfK said.
“Continued high inflation rates, currently at around six percent, are noticeably eroding the purchasing power of households and preventing private consumption from making a positive contribution,” Buerkl added.
German inflation was 6.1% in the latest data May, cooling from 7.2% in April, but high by historical standards, with underlying pressures on household spending still strong.
The European Central Bank increased its key deposit rate to 3.5% from 3.25% earlier in June, while signaling that it had further to go in its efforts to combat inflation, despite the headwinds the squeeze on spending will cause to economic growth.
Write to Ed Frankl at edward.frankl@wsj.com
The numbers: The final reading of a consumer-sentiment survey in May rebounded slightly to 59.2, but Americans remained worried about the future of the economy, especially against the backdrop of another fight in Washington over the debt ceiling.
The index, produced by the University of Michigan, registered a six-month low of 57.7 earlier in May. The index sank from 62 in April.
The consumer-sentiment survey reveals how consumers feel about their own finances as well as the broader economy.
Americans are worried about the possibility of recession and threat posed by a stalemate in talks between Democrats and Republicans on raising the U.S. debt limit. A similar impasse in 2011 also hurt consumer sentiment.
Sentiment is far below a recent peak of 88.3 in 2021 and a prepandemic high of 101. The index dropped to an all-time low of 50 last summer.
Key details: A gauge that measures what consumers think about the current state of the economy edged up to 64.9 from an initial 64.5 in May.
A measure that asks about expectations for the next six months also partly recovered to 55.4 from a preliminary 53.4 in May.
Both indexes are still quite low, however.
Inflation expectations haven’t changed much. Americans also think inflation will average just above 3% annually in the next five years.
Big picture: Higher borrowing costs have depressed purchases of houses and many other big-ticket items and put the brakes on U.S. growth. Yet even though the economy is more fragile now, there’s still no sign of a pending recession.
Market reaction: The Dow Jones Industrial Average
DJIA,
and S&P 500
SPX,
rose in Friday trades.
The numbers: The University of Michigan’s gauge of consumer sentiment fell to a preliminary May reading of 57.7 from an April reading of 63.5. That is the lowest level since November last year.
Economists polled by the Wall Street Journal had expected a May reading of 63.
Americans view on near-term inflation moderated slightly in May. They now expect the inflation rate in the next year to average about 4.5%. Inflation expectations had surged to 4.6% in April from 3.6 in March.
Inflation expectations over the next five years rose to 3.2% from 3% in April. That’s the highest reading since 2011.
Key details: A gauge that measures what consumers think about their financial situation — and the current health of the economy — fell to 64.5 from 68.2 in April.
Another measure that asks about expectations for the next six months moved down to 53.4 in May from 60.5 in the prior month.
Big picture: Consumer spending is the engine of the economy. If households grow concerned about the outlook and pull back, it could push the economy into recession.
And Federal Reserve officials won’t be pleased to see expectations of inflation over the long-term increase. They view expectations as a key source of future inflation pressure.
What UMich said: “Consumers’ worries about the economy escalated in May alongside the proliferation of negative news about the economy, including the debt crisis standoff,” the press release said. In the most serious debt-ceiling standoff in 2011 consumer sentiment plummeted to recession levels but recovered quickly when the crisis was averted.
What are they saying? “While we don’t place too much weight on the relationship, if sustained, the latest plunge in consumer sentiment would be consistent with falling consumption in the second quarter. That would be alongside the probable hit to consumption from tightening credit conditions,” said Olivia Cross, assistant economist at Capital Economics.
Market reaction: Stocks
DJIA,
SPX,
were lower in volatile trading on Friday while the yield on the 10-year Treasury note
TMUBMUSD10Y,
rose to 3.41%.
The numbers: A survey of consumer confidence fell in April to a nine-month low of 101.3, reflecting nagging worries about a possible recession and a softening labor market.
The closely followed index dropped 2.7 points from a revised 104 in the prior month, the Conference Board said Tuesday. The level of confidence in April was the lowest since July 2022.
Consumer…
Data on the U.S. consumer and housing market, plus several notable earnings reports, will be this week’s highlights. Barring any surprises, federal financial regulators’ Congressional testimony will be the main event on the banking front.
On Wednesday, Fed Vice Chair for Supervision Michael Barr and Federal Deposit Insurance Corp. Chairman Martin Gruenberg are scheduled to testify before the House Financial Services Committee. They’ll discuss the collapses of Silicon Valley Bank and Signature Bank and efforts to maintain confidence in the U.S. banking system.
The numbers: A survey of consumer sentiment slid to 63.4 in March and fell for the first time in four months, reflecting angst among Americans about high inflation and the health of the economy.
The preliminary reading in March was down from 67 in February, the University of Michigan said. Most of the survey was completed before the collapse of Silicon Valley Bank.
Consumer sentiment helps gauge how Americans feel about their own finances as well as the broader economy.
The index had fallen to a record low of 50 last summer before partly rebounding. Sentiment is still well below a recent peak of 88.3 in 2021, however, and a pre-pandemic high of 101.
Inflation expectations tapered off a bit but remained fairly high. Consumers expect prices to increase 3.8% in the next year, down from 4.1% in the prior month. That’s the lowest reading since April 2021.
Key details: A gauge that measures what consumers think about the current state of the economy dropped to 66.4 in March from 70.7in the prior month.
Sentiment fell the most among lower-income and younger Americans who tend to suffer disproportionately from high inflation. Some wealthier people with large stock holdings were also less confident in light of a recent decline in equities.
Another measure that asked about expectations for the next six months declined to 61.5 from a prior 64.7.
Americans think inflation will persist for some time. In the longer run, consumers believe inflation will increase about 2.8% a year, down slightly from 2.9% in the prior month.
That’s still well above the Federal Reserve’s 2% target, however.
Fed officials pay close attention to inflation expectations because they could be a harbinger of future price trends.
The rate of inflation over the past 12 months is 6%, based on the consumer-price index. It’s fallen from a 40-year peak of 9.1% last summer.
Big picture: Consumer sentiment is still far below levels associated with a healthy economy and it’s hard to see a big improvement anytime soon.
The Fed is raising interest rates to tame high inflation, a strategy that typically slows the economy.
Higher rates have also destabilized parts of the U.S. financial system as witnessed by the sudden collapse of Silicon Valley Bank. That’s adding new stress on the economy.
Market reaction: The Dow Jones Industrial Average
DJIA,
and S&P 500
SPX,
fell in Friday trades amid nagging worries about the U.S. financial system after the SVB failure
The numbers: U.S. consumer sentiment improved in late January to 64.9, according to the University of Michigan’s gauge of consumer attitudes.
This added 5.2 index points from 59.7 in December and was up from the initial January reading of 64.6.
Economists surveyed by The Wall Street Journal had forecast an unchanged reading of 64.6.
Key details: A gauge of consumer’s views of current conditions rose to a final reading of 68.4 in January from 59.4 in the prior month.
The indicator of expectations for the next six months rose to 62.7 from 59.9 in December.
Americans viewed that inflation was moderating in January. They expected the inflation rate in the next year to average about 3.9%, down from 4.4% in December. This is the lowest level since April 2021.
In the longer run, inflation expectations held steady at 2.9%.
Big picture: Consumer confidence rose for the second straight month on lower energy prices and better financial market conditions. Assessments of personal finances are improving, supported by higher income and easing price pressures.
But sentiment remains well below the pre-pandemic level of 101 hit in February 2020 and the more recent high of 88.3 hit in April 2021.
Market reaction: Stocks
DJIA,
SPX,
opened higher on Friday. The yield on the 10-year Treasury note
TMUBMUSD10Y,
rose to 3.54%.
U.S. stocks finished higher Friday, as investors weighed a flurry of bank earnings results for the fourth quarter and fresh data on consumer sentiment and inflation expectations.
All three major benchmarks also booked their best weekly percentage gains since Nov. 11, according to Dow Jones Market Data.
For the week, the Dow rose 2%, the S&P 500 advanced 2.7% and the Nasdaq gained 4.8% gain.
Read: Goldman Sachs sees these ‘prospective’ total returns across assets in 2023
Major stock indexes posted their best week of gains in two months on Friday after companies began reporting their fourth-quarter results, with big banks kicking off the earnings season.
No big surprises have come from the banks’ earnings results so far, with Bank of America Corp. and JPMorgan Chase & Co. indicating a potentially mild recession this year, according to Anthony Saglimbene, chief market strategist at Ameriprise Financial.
“I think the base case for most of the market right now is that we’re going to see a mild recession,” Saglimbene said in a phone interview Friday. “I don’t think anything that was said across bank earnings today surprised investors.”
Typically, the release of megabank earnings marks the unofficial start of the U.S. earnings reporting season, and market analysts will be watching closely this quarter for indications of how America’s largest companies are bracing for an expected economic downturn driven by higher interest rates.
JPMorgan
JPM,
Bank of America
BAC,
Wells Fargo & Co.
WFC,
and Citigroup
C,
were among banks that reported their fourth-quarter earnings Friday. JPMorgan was the top performer in the Dow Jones Industrial Average, with its shares closing 2.5% higher, FactSet data show.
Earnings will continue to be a “big focus” for markets this month, according to Saglimbene. “Analysts took down estimates pretty aggressively in the fourth quarter,” he said. “So the bar is pretty low for companies. We’ll see if they can hurdle past that.”
In U.S. economic data released Friday, the University of Michigan consumer sentiment index climbed in January to its highest level in nine months, as expectations for the rate of inflation one year out moderated.
“Signs that inflation has peaked and is moderating slowly kind of eases some of the anxiety that we’re going to see runaway inflation this year,” said Saglimbene.
A reading from the consumer-price index on Thursday showed U.S. inflation fell in December. Many investors are expecting that the Federal Reserve will slow its pace of interest rate hikes this year as the cost of living has cooled.
Read: Inflation slows again and clears path for slower Fed rate hikes
Stocks on Thursday pushed higher after St. Louis Federal Reserve Bank President James Bullard said the probability of a soft landing for the economy has increased due to “encouraging” inflation data.
Steve Sosnick, chief strategist at Interactive Brokers, said by phone Friday that he still favors consumer-staples stocks and companies with “more steady streams than more cyclical streams” of income. “If you’re looking at an economy that’s likely to slow down, it’s really hard for me to think that somehow ‘the cyclicals’ will be immune from the economic cycle,” he said.
Read: Why earnings season could be a ‘market-moving event’
—Barbara Kollmeyer contributed to this article.
The numbers: A survey of consumer sentiment rose to 64.6 in January and hit a nine-month high, reflecting easing worries about inflation and Americans’ greater confidence in their own finances.
The index increased from a revised 59.7 in December, the University of Michigan said.
Consumer sentiment is still weak, though. The index is well off a Coronavirus-era peak of 88.3 in April 2021 and a pre-pandemic high of 101.
Key details: A gauge that measures what consumers think about their financial situation — and the current health of the economy — climbed to 68.6 last month. One year ago, the index stood at 72.
Another measure that asks about expectations for the next six months moved up to 62 from 59.9 in the prior month. It’s also just a few notches below year-ago levels.
Americans viewed inflation as less of a threat. They expected the inflation rate in the next year to average about 4%, down from 4.4% in the prior month.
In the longer run, consumers said they see inflation falling toward 3% — above the Federal Reserve’s 2% target. Top 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 6.5%, based on the consumer-price index. It’s fallen from a peak of 9.1% last summer.
Big picture: Cheaper gas, rebounding stock prices and ebbing inflation have given Americans more reason for hope.
Yet rising interest rates and the threat of recession are leaving Americans on edge. The Fed is rapidly lifting rates to tame high inflation, but its get-tough approach has also increased the odds of a recession.
Looking ahead: “While that is the highest reading in nine months,” said U.S. economist Andrew Hunter at Capital Economics, the relatively low reading suggests “consumers remain unusually downbeat.”
Market reaction: The Dow Jones Industrial Average
DJIA,
and S&P 500
SPX,
fell slightly in Friday trades.
The numbers: A survey of consumer sentiment rose to 59.7 in December, buoyed by falling gas prices and a rebound in stocks earlier in the month. Yet Americans are generally pessimistic about the economy.
The final reading in the sentiment poll marked a small increase from the initial 59.1 result earlier in the month, the University of Michigan reported.
The index increased from 56.8 in November.
Consumer sentiment is still extremely weak, however. The index fell to a record low of 50 in June, just half as much as the 101 reading in the last month before the pandemic in 2020.
Key details: A gauge that measures what consumers think about their financial situation — and the current health of the economy — rose slightly to 59.4 last month. One year ago, the index stood much higher at 74.2.
Another measure that asks about expectations for the next six months registered 59.9, up from 55.6 in November. It was also well below year-ago levels, though.
Americans view inflation as somewhat less of a threat. They expect the inflation rate in the next year to average about 4.4%, compared to 4.9% in the prior month.
In the longer run, consumers see inflation falling toward 2.9%.
Top Federal Reserve officials pay close attention to inflation expectations because it could be a harbinger of future price trends.
The current 12-month rate of inflation is 7.1%, based on the consumer-price index. It’s fallen from a peak of 9.1% last summer.
Big picture: Falling gas prices and a slowdown in inflation have given consumers something to cheer about during the holidays. But they consumers are worried about what the future will bring.
The Federal Reserve is rapidly raising interest rates to slow inflation even further, but higher borrowing costs are weakening the economy. That’s likely to result in rising unemployment in 2023 — and perhaps even a recession.
Looking ahead: “While the sizable decline in short-run inflation expectations may be welcome news, consumers continued to exhibit substantial uncertainty over the future path of prices,” said survey director Joanne Hsu.
Market reaction: The Dow Jones Industrial Average
DJIA,
and S&P 500
SPX,
XXX in Friday trades.
The numbers: The University of Michigan’s gauge of consumer sentiment rose to a preliminary December reading of 59.1 from a November reading of 56.8.
Economists polled by the Wall Street Journal had expected a December reading of 56.5.
Inflation expectations over the next year fell to 4.6% from 4.9% last month. It is the lowest since September 2021. Five-year inflation expectations remained steady at 3%.
Key details: A gauge of consumer’s views of current conditions rose to 60.2 in December from 58.8 in November, while an indicator of expectations for the next six months rose to 58.4 from 55.6 last month.
Big picture: Economists think falling gasoline prices are behind the improvement in confidence.
The national average retail price for a gallon of gas is now $3.33, down $1.69 from June, according to White House data.
Still, high inflation has consumers remain in a relatively dour mood. The index is only marginally above the record low of 50 in June. By comparison, the consumer sentiment index was 101 in February of 2020.
Looking ahead: “High prices coupled with ongoing aggressive rate hikes will be a headwind for consumers and sentiment going forward,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics.
Market reaction: Stocks
DJIA,
SPX,
were higher on Friday on the back of hotter-than-expected wholesale inflation in November. The yield on the 10-year Treasury note
TMUBMUSD10Y,
rose to 3.54%.