UMich Inflation Expectations Unexpectedly Rebounded In Early February

After a surprise jump in January, University of Michigan’s sentiment survey was expected to continue to improve (although marginally so) in preliminary February data and it did, rising from 64.9 to 66.4 (better than the 65.0 exp). This was driven by a jump in current conditions (highest since Dec 2021) while expectations limped lower…

Source: Bloomberg

Democrats’ sentiment fell for the second straight month while Republicans and Independents are more positive….

Source: Bloomberg

Finally, the most-watched aspect of the survey is once again the inflation expectations and in a surprise move, short-term expectations rebounded from 3.9% to 4.2%…

Source: Bloomberg

However, as UMich itself notes, consumers continued to exhibit considerable uncertainty over both long and short-term inflation expectations, indicating the tentative nature of any declines.

Interestingly , Bloomberg shows that it is the lowest income groups and MidWesterners that are the most fearful of inflation resurgence…

Source: Bloomberg

Overall, high prices continue to weigh on consumers despite the recent moderation in inflation, and sentiment remains more than 22% below its historical average since 1978. Combined with concerns over rising unemployment on the horizon, consumers are poised to exercise greater caution with their spending in the months ahead.