Americans just signaled their highest level of confidence in the U.S. economy in more than two years.
The index for consumer sentiment rose to 79.6 in February from 79.0 in January, marking a 0.8% increase month over month, a 19% jump year over year, and the highest reading since July 2021, according to the latest University of Michigan consumer sentiment report, which was published on Friday.
“Consumer sentiment was essentially unchanged from January, rising 0.6 index points this month and solidifying the large gains from the past two months,” said consumer survey director Joanne Hsu, per the report.
“The fact that sentiment lost no ground this month suggests that consumers continue to feel more assured about the economy, confirming the considerable improvements in December and January across various aspects of the economy,” she said. “Consumers continued to express confidence that the slowdown in inflation and strength in labor markets would continue.”
However, based on preliminary results, Americans reported a small drop in confidence regarding the economy’s current outlook. During the month, sentiment toward current economic conditions fell from 81.9 to 81.5, marking a 0.5% drop from the preceding month but a 15.3% increase over the last year.
While prices have eased from their 9.1% inflationary peak back in June 2022, the Federal Reserve has largely struggled to finish up the last mile and get inflation sustainably down to the U.S. Central Bank’s 2% target, as previously reported by The Dallas Express.
According to Hsu, short-run inflation expectations have stayed within the 2.3-3.0% range for the last two months, while long-run inflation expectations have remained within the 2.9-3.1% range for 28 of the last 31 months.
“Long-run inflation expectations were elevated relative to the 2.2-2.6% range seen in the two years pre-pandemic,” Hsu said in the report.
Overall, preliminary results for February show that the indexes for consumer sentiment and consumer expectation were up 19% and 21.6% year over year, respectively. Outlook for current economic conditions was also up in February, rising 15.3% over the last 12 months.
