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UMich Inflation Expectations Dip to 4.0% - Survey Confirms

Daniel Plainview

Updated: January 15, 2023

UMich inflation
Editor’s Note:

EDITOR'S NOTE: We saw an uptick in the latest UMich Consumer Sentiment survey with regard to spending and, not surprisingly, inflation expectations. In case you’re unfamiliar with this economic report, the Consumer Sentiment index represents, by way of a massive survey, consumers’ attitudes toward their own financial well-being and future economic expectations. You can read more about Consumer Sentiment on the Britannica Money page. This uptick correlates to the market rally we saw last week following the CPI release. Yet as we reported in a separate curation, there are two other factors you have to consider: banks largely hold a recessionary outlook, and some analysts are betting on the likelihood that inflation will uptick again in 2023 (not unlike what we saw in the mid-1970s). So, should you go all in on the market and lift your hedges? We advocate caution. Read on to get the analysis of the latest sentiment figures. The uptick resembles green shoots, from one perspective, but also, and more suspiciously, a bear rally.

Once again, the most crucial aspect of the UMich sentiment survey is respondents' forecasts for inflation. After yesterday's 0.1% MoM decline in CPI, hope remains high that we are past peak inflation and this morning's UMich data seemingly confirms that as 1-year inflation expectations plunged to 4.0% (vs 4.3% exp), even though medium-term expectations rose modestly (to 3.0% from 2.9%). That is the lowest 1-year outlook since April 2021...

Source: Bloomberg

But once again, we remind readers that UMich itself admits the uncertainty around this forecast is extremely high...

Source: Bloomberg

Back to the headline sentiment signals, UMich was expected to show a modest rise in confidence (led by improvement in current conditions offsetting modest weakness in expectations), and it did but the jump in sentiment was much more than expected, with Current Conditions soaring to 68.6 from 59.4 (60.0 exp) and Expectations rising from 59.9 to 62.0...

Source: Bloomberg

Buying Conditions improved for all cohorts...

Source: Bloomberg

Current assessments of personal finances surged 16% to its highest reading in eight months on the basis of higher incomes and easing inflation.

Democrats' sentiment weakened in December (post-Midterms) while Republicans and Independents rose...

Source: Bloomberg

Although the short-run economic outlook fell modestly from December, the long-run outlook rose 7% to its highest level in nine months and is now 17% below its historical average.

 

Originally published by Tyler Durden at ZeroHedge

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