– Consumer sentiment in the US surprisingly jumped higher
Thanks to lower inflation, a measure of consumer confidence in the US is rising more than economists expected.
US consumer confidence unexpectedly improved at the end of the year as inflation eased. The Consumer Confidence Index rose to a revised 108.3 in December from a revised 101.4 in November, the institute’s Conference Board reported in its survey Wednesday. This is the best value since April. Economists expected only 101.0 points.
The reason for the improved consumer mood is the evidence that high inflation has eased, which is affecting Americans’ buying mood. Inflation in goods and services fell to an annual low of 7.1% in November. “Inflation expectations in December fell to their lowest level since September 2021, with the recent drop in gasoline prices providing significant impetus,” Lynn Franco of the Conference Board said, explaining the rising sentiment.
According to the survey, Americans are willing to spend more money on vacations. On the other hand, the desire to buy homes and large appliances continued to decline. Perhaps this is due to sharp increases in interest rates by the US Federal Reserve, which caused, for example, a rise in mortgage rates.
The Fed recently raised interest rates by half a percentage point to the new range of 4.25 to 4.50%. Previously, it had made four big rate hikes in a row — by 0.75 percentage points each time. Franco predicted that “this shift in consumer preference from expensive goods to services will continue in 2023, as will headwinds from inflation and higher interest rates.” A good consumer mood should help the world’s largest economy avoid recession in the coming months. Private consumption accounts for about 70% of the country’s economic output.