U.S. consumer confidence rose in January from the previous month to its highest level since 2005, as falling inflation helped bolster views about the economy and household finances.
The University of Michigan’s final sentiment index for the month rose 9.3 points from December to 79, according to data released Friday. The preliminary reading for January was 78.8.
Americans expect prices to rise at a rate of 2.9% over the next year, compared to 3.1% the previous month. They consider that costs will increase by 2.9% in the next five to ten years.
“After reserving judgment last fall on whether the slowdown in inflation would persist, consumers now feel confident that inflation will continue to weaken,” Joanne Hsu, director of the survey, said in a statement.
The highest level of confidence since July 2021 has the potential to sustain household demand and keep the economy on its expansion path. At the same time, declining inflation expectations may reassure Federal Reserve policymakers as they consider when to cut interest rates.
Separate figures on Friday suggested that central bankers will be in no rush to cut rates. Employers added a whopping 353,000 jobs in January, the most in a year, and wage increases accelerated, Labor Department data showed.
The Michigan Confidence Report indicated that purchasing conditions for durable goods rose sharply in January. Consumer perceptions of their current financial situation and outlook also improved starting in late 2023.
The overall indicator of current conditions rose to 81.9 from 73.3 in December. The January expectations measure rose to 77.1 from 67.4 a month earlier.
With the help of Kristy Scheuble