By Xavier Fontdegloria


U.S. consumer sentiment edged up in January for a second consecutive month, reaching its highest level since April, as short-term inflation expectations continued to ease.

The University of Michigan said Friday that its consumer sentiment index rose to 64.9 in January from 59.7 in December, slightly up from its mid-month reading of 64.6.

Economists polled by The Wall Street Journal expected consumer confidence to be unchanged from the preliminary 64.6.

January gains were driven by improving assessments of both personal finances and buying conditions for durable goods, supported by strong incomes and easing price pressures, said Joanne Hsu, the survey's director.

The index measuring Americans' assessment of the current economic conditions rose to 68.4 in January from 59.4 the prior month, broadly in line with the preliminary reading of 68.6. Meanwhile, the measure gauging short-term expectations increased to 62.7 from 59.9, up from the mid-month print of 62.0.

Despite recent gains, confidence remains subdued by historical standards, highlighting the damage from still-high inflation rates to Americans' disposable incomes and increasing concerns over a recession.

"There are considerable downside risks to sentiment, with two-thirds of consumers expecting an economic downturn during the next year," Ms. Hsu said. The debt-ceiling debate could reverse the gains registered over the last several months, as past debt-ceiling crises in 2011 and 2013 prompted steep declines in consumer confidence, she said.

U.S inflation slowed for the sixth straight month in December, to 6.5%, after peaking in mid-2022. In this context, inflation expectations also receded in January, particularly those for the next year.

Consumers expect prices to rise 3.9% over the next year, down from the 4.4% increase they anticipated in December, the lowest rate since April 2021. Meanwhile, inflation expectations for the next five years, a closely watched indicator for Federal Reserve officials, were stable at 2.9%.

"Consumers continued to exhibit considerable uncertainty over both long and short-term inflation expectations, indicating the tentative nature of any declines," Ms. Hsu said.


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(END) Dow Jones Newswires

January 27, 2023 10:32 ET (15:32 GMT)

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