:max_bytes(150000):strip_icc()/GettyImages-1940029074-9ae975ce1562488cb1a1a825f7460ff5.jpg "Consumer Sentiment Revved Up on the Eve of the Election")
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Key Takeaways
- The Michigan Consumer Sentiment Index hit its highest levels in six months as consumers said they felt better about inflation and their earning potential.
- Business expectations hit their highest marks in four years, while consumer expectations were at their highest point since July 2021.
- The results were taken ahead of Tuesday’s election results, but economists have said that consumer sentiment generally improves in the aftermath of an election.
Consumer sentiment hit its highest readings in six months as expectations surged heading into the presidential election.
The Michigan Consumer Sentiment index rose for the fourth straight month to hit 73.0 in the preliminary November reading. That’s up from the 70.5 in October, as inflation worries continued to subside. The survey concluded before the Tuesday election of Republican Donald Trump, though economists have pointed to surges in confidence following an election.
“Consumers are expecting economic progress for them, including cooling inflation and lower interest rates,” said Robert Frick, corporate economist with Navy Federal Credit Union.
Among the biggest improvements in the survey was the expectations index, which jumped to 78.5 in November from 74.1 in the prior month, to reach its highest reading since July 2021. With belief that income will improve, consumers’ expectations for their personal finances were higher by 6%, while expectations for solid long-run business conditions hit their highest levels in nearly four years.
“It will be interesting to see if this confidence translates into stronger consumer spending, especially because so many consumers are running low on savings and credit,” Frick said.
Inflation Expectations Slowed to Lowest Levels Since 2020
Year-ahead inflation expectations also came in lower, down to 2.6%, the lowest reading on the closely-watched metric since December 2020. The improvement comes as the Consumer Price Index (CPI) inflation reading declined to 2.4% in September.
“Markets and policy makers are closely watching if inflation expectations remain anchored. This will be key for policy decisions, especially in the next few months,” wrote Jeffrey Roach, LPL Financial chief economist.
Federal Reserve officials monitor consumer inflation expectations to see whether the public believes prices are cooling, which can help lead to behavior that lowers inflation. The Fed has said that inflation risks have begun to subside, leading them to begin lowering interest rates in order to shore up softness in the labor market.