U.S. Consumer Sentiment Waned in Early January on Omicron, Inflation Fears
Sentiment among U.S. consumers worsened in early January as the surge in Covid-19 cases due to the Omicron variant and high inflation dampened Americans’ mood.
The preliminary estimate of the index of consumer sentiment released Friday by the University of Michigan decreased to 68.8 in January from 70.6 in December, missing the 70.0 forecast from economists polled by The Wall Street Journal.
The reading remains well below February 2020’s pre-pandemic level of 101.0, and sentiment has been moving sideways in the last few months at around decade-lows due to the pandemic and high price growth.
“While the Delta and Omicron variants certainly contributed to this downward shift, the decline was also due to an escalating inflation rate,” said Richard Curtin, the survey’s chief economist.
Americans’ expected inflation rate for the next year edged up to 4.9% in January from 4.8% the previous month. For the next five years, consumers expect prices to rise 3.1%, up from the 2.9% increase reported in December.
Three-quarters of consumers in early January ranked inflation, compared with unemployment, as the more serious problem facing the nation, Mr. Curtin said.
One-third of those polled reported being worse off financially than a year earlier, the highest proportion since 2014. Inflationary erosion of living standards was the main explanation offered by these consumers, he said.
Consumers’ assessment of the current economic conditions fell to 73.2 in January from 74.2 in December. The index of consumer expectations–which reflects the balance of respondents anticipating improved business conditions in the next six months–dropped to 65.9 from 68.3 the previous month.
The final reading for the month will be published on Jan. 28.
Source: Dow Jones