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UMich Sentiment Rebounds Modestly From Decade-Lows Amid “Emerging Wage-Price Spiral”

UMich Sentiment Rebounds Modestly From Decade-Lows Amid “Emerging Wage-Price Spiral”

After puking to decade lows in November (despite record high stocks), analysts expected a modest rebound in the headline UMich sentiment survey (but drops in the current and future expectations indices?). Instead the headline rose from 67.4 to 70.4 in preliminary December data and both current conditions (74.6 vs 73.6 prior and 73.5 exp) and Expectations (67.8 vs 63.5 prior and 62.5 exp) jumped notably.

Source: Bloomberg

Notably the gap between the Current and Expected change in Personal Finances is very ugly…The pandemic recession had an impact on personal finances like no other crisis in more than a half century. While consumers’ evaluations of their current and prospective financial situation have both declined, for the first time there has been a substantial gap between the two assessments.

The decline in how consumers have judged their current financial situation was half as large as the decline in how they judged their future financial prospects.

“Consumers continued to voice a considerable degree of uncertainty about future inflation rates, mostly about near- rather than long-term inflation rates,” Richard Curtin, director of the survey, said in a statement.

Buying Conditions bounced very modestly from multi-decade lows…

Source: Bloomberg

Finally, following this morning’s surge in CPI, both short- and mid-term UMich inflation expectations were unchanged in the preliminary December data at +3.0% and +4.9% respectively.

Source: Bloomberg

The most interesting result was the large disparity between monthly gain among households with incomes in the lowest third (+23.6%) of the income distribution compared with the modest losses among households in the middle (-3.8%) and top third (-4.3%).

UMich Chief Economist Richard Curtin explains that when directly asked whether inflation or unemployment was the more serious problem facing the nation, 76% selected inflation while just 21% selected unemployment (the balance reported the problems were equal or they couldn’t choose). The dominance of inflation over unemployment was true for all income, age, education, region, and political subgroups.

While a shift in policy emphasis is necessary, it will be difficult to gauge the right balance between fiscal and monetary policies that both trims inflation and maintains the unemployment rate near its current lows.

Tyler Durden
Fri, 12/10/2021 – 10:11

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