The latest consumer sentiment survey indicates a positive note for the economy as 2023 begins. According to the University of Michigan, the final reading of the survey rose to 69.7, up from 69.4 earlier in the month.
The survey encompasses how consumers perceive their own financial situations and the wider economy. Previously, the index had experienced a decline for four consecutive months before rebounding in the last month of the previous year.
Several factors contribute to this positive sentiment, including lower gas prices, a thriving stock market, and a robust labor market. These elements have instilled consumers with greater confidence in the overall state of the economy.
Although a gauge measuring the current state of the economy decreased slightly from a preliminary 74.0 to 73.3, there was an encouraging uptick in expectations for the next six months. This measure increased from an initial 66.4 to 67.4, marking a five-month high.
Furthermore, Americans anticipate a decrease in inflation rates. They predict that inflation will average at 3.1% in the upcoming year, down significantly from the 4.5% predicted in November. Currently, the inflation rate stands at 3.1%.
Despite the recent boost in consumer sentiment, it's important to note that the economy has experienced a slowdown following a period of surprising growth in the fall. Additionally, experts predict that higher interest rates may constrain growth early on in the new year.
In response to the optimistic consumer sentiment, the Dow Jones Industrial Average (DJIA) and the S&P 500 (SPX) both recorded gains in Friday's trading.