Preliminary data released by the University of Michigan on Friday (13th) showed that consumers’ initial one-year inflation expectations fell to 4%, the lowest since April 2021, boosting consumer confidence in January. It reached 64.6, a 9-month high, far exceeding the expected market expectation of 60.5, and the previous value was 59.7.
In terms of inflation expectations, which are closely watched by the market, U.S. consumers’ inflation expectations for the next year have declined, from 4.4% to 4%, the lowest since April 2021. In addition, inflation expectations for the next five years rose slightly from the previous value of 2.9% to 3%, in line with market expectations.
The December data released by the United States showed that inflation continued to subside, further proving that price pressures have peaked, giving the Federal Reserve (Fed) room to slow down the pace of interest rate hikes at its February monetary policy meeting.
In terms of other indexes, the initial value of the current situation index of the University of Michigan rose to 68.6 in January, far exceeding the expected 60, and the previous value was 59.4; in addition, the consumer expectations index also rose to 62 from the previous value of 59.9 in January, and the above two indexes both rose to 9 new high for the month.
However, the risk of a U.S. recession remains, one of the factors holding back consumer confidence from rebounding to pre-pandemic levels. Many economists predict that the Fed’s interest rate hikes will tip the U.S. economy into recession sometime next year, pushing up unemployment.
The University of Michigan report showed that the economic outlook for the next year has deteriorated, but the economic outlook for the next five years has improved, hitting a new high in four months. “Two-thirds of consumers expect an economic downturn in the year ahead, reflecting weak consumer confidence despite the recent economic upturn,” said Joanne Hsu, director of the University of Michigan Consumer Confidence Survey.
“Nonetheless, given record-low unemployment in the U.S. and strong expected incomes, a gradual slowdown in spending, rather than a precipitous decline, appears more likely,” she said.