First Look at Consumer Sentiment for January Slightly Beat Views

Shoppers at Third Street Promenade outdoor shopping mall on August 17, 2012 in Santa Monica, California. (Photo: Reuters)

The Survey of Consumers, a closely-watched gauge of consumer sentiment from the University of Michigan, ticked up to 93.3 in January from a final reading in December of 92.6.

“Consumer confidence inched upward for the fourth consecutive month due to more positive expectations for future economic growth,” Surveys of Consumers chief economist, Richard Curtin said. “Personal financial prospects have remained largely unchanged during the past year at the most favorable levels since 2007 largely due to trends in inflation rather than wages. Indeed, expected wage gains fell to their lowest level in a year in early January, but were more than offset by declines in the expected inflation rate.”

Wall Street expected a slightly lower reading of 93, but inflation-adjusted income expectations rose to their highest level in nine years. Unfortunately, consumer optimism is now dependent on the continuation of an extraordinarily low inflation rate. A report released by the Labor Department Friday found wholesale inflation slid in December by 0.2%.

“Rather than welcoming a rising inflation rate as a signal of a strengthening economy, consumers are now more likely to reduce the pace of their spending and thus act to erase the Fed’s rationale for higher interest rates,” Curtin added. “Given the favorable overall state of the Sentiment Index, the data continue to indicate that real personal consumption expenditures can be expected to advance by 2.8% in 2016.”