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Michigan Consumer Sentiment Falls to 68.8 as Inflation Dampens Individuals’ Outlook

Consumer Sentiment Reaches Second Lowest Level in 10 Years

  • University of Michigan Consumer Sentiment (JAN) = 68.8
  • Forecast = 70

Michigan Consumer Sentiment Falls to 68.8 as Inflation Dampens Individuals’ Outlook

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The Sentiment Index has averaged just 70.3 in the past six months, whereas in the first six months of 2021 it averaged 82.9. While the Omicron variant certainly played a part in the lower figure, the drop was also due to escalating inflation.

Something that was particularly interesting was that when asked whether unemployment or inflation was a bigger problem, three quarters of respondents chose the latter. The now widespread concern that individuals have over inflation seems to have already been priced into the market as the Fed looks determined to ramp up tapering efforts and is expected to hike rates 3 times in 2022.

Additionally, and rather Importantly, confidence in government economic policies is at its lowest level since 2014.

Immediate Dollar (DXY) Response

The US dollar, measured here by the broad US dollar index (DXY), witnessed a temporary spike before immediately returning near to levels witnessed before the news.

US Dollar Basket (DXY) 5 Minute Chart

Michigan Consumer Sentiment Falls to 68.8 as Inflation Dampens Individuals’ Outlook

Source: IG, prepared by Richard Snow

What is the University of Michigan Consumer Sentiment Survey?

The Index of Consumer Expectations focuses on three areas: how consumers view prospects for their own financial situation, how they view prospects for the general economy over the near term, and their view of prospects for the economy over the long term. The samples for the Surveys of Consumers are statistically designed to be representative of all American households, excluding those in Alaska and Hawaii. Each month, a minimum of 500 interviews are conducted by telephone.

— Written by Richard Snow for DailyFX.com

Contact and follow Richard on Twitter: @RichardSnowFX

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