Slowing inflation

Americans' attitudes toward the economy continued to improve in January, thanks to slowing inflation

From CNN's David Goldman

Americans continued to feel more upbeat about the economy this month, according to the University of Michigan's latest consumer survey released Friday.

Consumer sentiment soared 13% in January, according to the university's final reading, confirming what a preliminary estimate showed earlier this month. Sentiment reached its highest level since July 2021, "reflecting improvements in the outlook for both inflation and personal incomes."

"After reserving judgment last fall about whether the slowdown in inflation would persist, consumers now feel assured that inflation will continue to soften," Joanne Hsu, the university's Surveys of Consumers director, said in a release. "Sentiment has resumed the upward trajectory from the all-time low measured in June of 2022, which had stalled in the late summer and fall of 2023."

Indeed, inflation slowed markedly throughout 2023 as both economic growth and the job market remained on strong footing. It's clear that inflation weighs heavily on US consumer sentiment. Sentiment reached a record low in June 2022, which was the same month that inflation reached a four-decade high.

Still, the university's sentiment index remains well below pre-pandemic levels, but if inflation continues to cool further, then sentiment would likely follow suit, recovering further. The job market holding steady would also boost US consumer moods, since personal incomes were also a big reason why sentiment jumped in January.