Americans continue to feel good about the economic outlook during the peak weeks of the holiday-shopping season, according to a closely watched gauge of U.S. consumer sentiment.
The University of Michigan said Friday its preliminary index of consumer sentiment was 97.5 this month, unchanged from November’s final reading. That beat economists’ expectations for a drop to 97.0 for December’s preliminary reading.
“As long as job and income growth remain strong, rising prices and interest rates will not cause substantial cutbacks in spending,” said the survey’s chief economist, Richard Curtin.
Still, he noted that in the early December survey, “consumers did mention hearing much more negative news about future job prospects.”
Expectations for the future deteriorated for a third straight month in December’s survey. The current conditions index rose to 115.2 from 112.3 in November.
“Headline sentiment is holding up remarkably well in the face of the volatility in the stock market because the current conditions index has rebounded,” Pantheon Macroeconomics economist Ian Shepherdson said in a note to clients, adding “perhaps it is being boosted now by the decline in gas prices.”
U.S. employers slowed their pace of hiring slightly last month, but the labor market remains on a very strong footing. The Labor Department said Friday that U.S. nonfarm payrolls increased a seasonally adjusted 155,000 in November, compared with 237,000 in the prior month. The unemployment rate held steady at 3.7%, matching the lowest rate since December 1969.
Economists expect low joblessness and solid wage growth to support consumer spending during the crucial holiday season. Still, turbulence in the stock market and mounting concerns about global growth pose potential headwinds.
The Conference Board said late last month that its index of U.S. consumer confidence dropped to 135.7 in November from 137.9 in October, driven by weaker expectations for the economy.
Still, measures of consumer confidence remain high by historical standards. The University of Michigan Surveys of Consumers sentiment gauge has held in 2018 at the highest level of any year since 2000. The readings climbed after Donald Trump was elected president in 2016 and have been supported since then by solid economic growth, consistent hiring and historically low unemployment.
Friday’s report also showed that household expectations about future inflation weakened this month. In December, consumers said they expected 2.4% inflation in five to 10 years, down from 2.6% in the prior month. Their expectation for inflation over the next year ticked lower to 2.7% from 2.8%.
The Federal Reserve targets 2% year-over-year inflation, as measured by the Commerce Department’s personal-consumption expenditures price index. The PCE price index in October was up 2% on the year, and prices excluding volatile food and energy costs rose 1.8% from October 2017.
Fed Vice Chairman Richard Clarida said last week that he expects inflation to continue running at or close to the Fed’s 2% target, although “it is important to monitor measures of inflation expectations to confirm that households and businesses expect price stability to be maintained.”
Write to Harriet Torry at firstname.lastname@example.org