It’s cold outside but consumer sentiment remains red hot going into the Christmas holiday and year-end.
The University of Michigan’s index of consumer sentiment reached 99.3, a tick up from the mid-month estimate and above November’s 96.8. Economists had estimated a score of 99.2.
The impeachment of Donald Trump by Democrats in the House of Representatives has a “barely noticeable impact” on consumer sentiment, Richard Curtin, chief economist for the Surveys of Consumers, said. It was mentioned by just 2 percent of the public.
The December survey challenges the credibility of the Fed’s determination to raise inflation back towards its target.
“Inflation expectations declined in the December survey, with both the year-ahead and five-year expected inflation rates falling,” Curtin said. “For the year-ahead, an annual inflation rate of 2.3% was expected, the lowest since 2.2% was recorded twice, in December 2016 and September 2010 prior to the Great Recession’s lows. Over the next five years, consumers expected an annual inflation rate of just 2.2% in December 2019, the lowest level since this question was first introduced in the late 1970s.”
The extremely favorable consumer sentiment level poses a challenge for Democratic presidential hopefuls, many of whom insisted at Thursday night’s debate that the economy was not working well for many Americans. In reality, consumer sentiment is strong across all income and demographic groups.