U.S. Consumer Sentiment Surges To More Than Two-Year High In January

Consumer sentiment in the U.S. has improved much more than anticipated in the month of January, according to preliminary data released by the University of Michigan on Friday.

The University of Michigan said its consumer sentiment index surged to 78.8 in January after jumping to 69.7 in December. Economists had expected the index to inch up to 70.0.

With the much bigger than expected increase, the consumer sentiment index reached its highest level since hitting 81.2 in July 2021.

"Consumer views were supported by confidence that inflation has turned a corner and strengthening income expectations," said Surveys of Consumers Director Joanne Hsu.

She added, "Over the last two months, sentiment has climbed a cumulative 29%, the largest two-month increase since 1991 as a recession ended."

The sharp increase by the headline index came as the current economic conditions index spiked to 83.3 in January from 73.3 in December, while index of consumer expectations shot up 75.9 in January from 67.4 in December.

The University of Michigan's report also showed continued decreases in both year-ahead and long-run inflation expectations.

Year-ahead inflation expectations slipped to 2.9 percent in January after plunging to 3.1 percent in December, hitting the lowest level since December 2020.

Long-run inflation expectations also edged down to 2.8 percent in January from 2.9 percent in December, falling just below the 2.9-3.1 percent range seen for 26 of the last 30 months.