U.S. Consumer Sentiment Shows Modest Rebound, Previously Optimistic Projections Prove Overstated

The University of Michigan’s revised consumer sentiment data for December revealed a more cautious economic outlook than market participants had anticipated. The consumer sentiment index came in at 52.9, marking a downward revision from the initial preliminary estimate of 53.3, and falling below the 53.4 consensus forecast among economists.

Despite this setback, the headline figure still maintained an improvement trajectory relative to November’s 51.0 reading—the lowest level recorded since June 2022, when the index hit a record bottom of 50.0. This month-over-month gain was primarily driven by a rebound in consumer forward-looking attitudes, with the expectations index climbing sharply to 54.6 from November’s 51.0.

However, gains in sentiment masked underlying weakness in assessments of present conditions. The current economic conditions index declined to 50.4 from 51.1, signaling persistent headwinds in household purchasing power and economic fundamentals.

Inflation Pressures Moderate for Fourth Consecutive Month

Perhaps the most encouraging development emerged in inflation expectations data. Year-ahead inflation forecasts fell to 4.2 percent in December, down from 4.5 percent in November, marking the fourth consecutive monthly decline and reaching an eleven-month low. Long-run inflation expectations similarly moderated to 3.2 percent, matching the January 2025 level and down from 3.4 percent previously.

According to Surveys of Consumers Director Joanne Hsu, these longer-term readings demonstrate meaningful improvement. Last year, such readings fluctuated between 2.8 and 3.2 percent, while the 2019-2020 period consistently stayed below 2.8 percent—suggesting current expectations, though improved, remain elevated by historical standards.

The data presents a mixed picture for policymakers and investors alike, balancing modest sentiment recovery against persistent economic uncertainty and the lag between inflation moderation and consumer confidence rebuilding.