Consumer Confidence Surges as Economic Outlook Brightens

After two years shaped by inflation woes and recession fears, U.S. consumers are feeling increasingly optimistic about the economy. Preliminary January results from the University of Michigan’s monthly Index of Consumer Sentiment show a steep increase in consumer confidence for the second month running.

The index, which is based on around 600 telephone interviews (400 for the preliminary results) and focuses on personal finances, business conditions and buying conditions, reached its highest level since July 2021 and is now up nearly 60 percent from its all-time low recorded in June 2022, when inflation peaked at almost 9 percent.

“Consumer views were supported by confidence that inflation has turned a corner and strengthening income expectations,” Survey of Consumer Director Joanne Hsu wrote. “Over the last two months, sentiment has climbed a cumulative 29 percent, the largest two-month increase since 1991 as a recession ended.”

With inflation easing despite the labor market remaining strong, robust consumer spending and solid economic growth, consumers are now hopeful that a so-called “soft landing” can be achieved, contrary to the view that a recession was more or less inevitable, which dominated headlines for the better part of the past two years.