On Friday (January 19th) local time, the latest data released by the University of Michigan in the United States showed that consumers had been worried about a slowdown in the economy and even a more severe recession, but now they are becoming increasingly confident in the economic and inflation process in 2024.
Specific data shows that the initial value of the University of Michigan Consumer Confidence Index in January in the United States was 78.8, reaching the highest level since July 2021, indicating that the significant increase in December was not accidental.
Joanne Hsu, the survey director of Michigan Consumer Confidence Data, said that consumer confidence in improved inflation and increased income expectations support consumer sentiment. In the past two months, the confidence index has risen by a cumulative 29%, the largest two month increase since the end of the economic recession in 1991.
At present, consumer confidence has risen by nearly 60% from the historical low point in June 2022, which may provide some positive impetus for the economy. The current consumer confidence is only 7% lower than the historical average level since 1978.
In addition, with the improvement of the overall economic outlook, consumer confidence in the declining inflation has also increased.
Data shows that after a significant decline in December last year, consumers' inflation expectations for the next year have fallen to 2.9%. The current data is the lowest level since December 2020, within the range of 2.3-3.0% in the two years before the pandemic.
Long term inflation expectations have slightly decreased to 2.8%, slightly lower than the 2.9-3.1% range recorded in 26 months over the past 30 months. Compared to the range of 2.2% to 2.6% in the two years before the epidemic, these expectations are still slightly higher.
The easing of inflation expectations supports economists' view that the Federal Reserve will begin cutting interest rates at some point in the first half of this year. Since March 2022, the Federal Reserve has raised its benchmark interest rate by 525 basis points.
Amidst the decline in gasoline prices and the strong rise in the US stock market, consumer confidence continues to improve. According to data from the American Automobile Association (AAA), the price of a gallon of regular gasoline is about 30 cents lower than a year ago. At the same time, the S&P 500 index is also approaching historical highs.
Andrew Hunter, Deputy Chief Economist at Kaitou Macro, commented that these survey data are "another sign that the economy is entering a soft landing trajectory.". However, he pointed out that such surveys do not always reflect consumer behavior.
The market has recently been constrained by expectations of the Federal Reserve's interest rate policy. The general expectation is that there will be a maximum of six interest rate cuts this year, but the timing of the cuts is not yet clear, and the policy may be relaxed as early as March.