US Consumer Sentiment Rises More Than Predicted To 6-Month Highs, Inflation Expectations Hit 4-Year Low

The University of Michigan’s widely followed consumer survey showed Friday that confidence hit a six-month high in November, driven by an optimistic future outlook and stable inflation expectations.

November Consumer Sentiment Report: Key Highlights

• The consumer sentiment index rose from 70.5 in October to 73 points in November, marking a 3.5% monthly surge and surpassing economist estimates – as tracked by TradingEconomics – of 71, preliminary estimates from the University of Michigan showed.
• The sub-index for consumer expectations increased from 71.1 to 78.5 points, marking the highest level since July 2021.
• The sub-index for current conditions eased from 64.9 to 64.4.
• The year-ahead inflation expectations fell from 2.7% to 2.6%, the lowest since December 2020. Long-term inflation expectations inched slightly higher from 3% to 3.1%.

Economist Takeaways

The expectations index surged across all dimensions, reaching its highest reading since July 2021.

“Expectations over personal finances climbed 6% in part due to strengthening income prospects, and short-run business conditions soared 9% in November. Long-run business conditions increased to its most favorable reading in nearly four years,” said University of Michigan’s Surveys of Consumers Director Joanne Hsu. 

Consumer sentiment is now roughly 50% higher than its June 2022 low, but remains below pre-pandemic readings, Hsu said. She added that interviews for the release concluded Monday and do not include reactions to the presidential election.

Market Reactions

Stocks were little moved Friday, with major U.S. equity indices hovering broadly around the flatline during New York morning trading.

Small caps, tracked by the iShares Russell 2000 ETF (ARCA: IWM, inched 0.3% higher.

Real estate and utilities were the best performing sectors, up 1.3% and 1.2%, respectively.

Treasury yields continued to fall on Friday, with the 10-year yield down by 5 basis points. As such, long-dated bond ETFs rallied, with the iShares 20 + Year Treasury bond ETF TLT rallied 1.3%.

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