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U.S. Consumer Sentiment Unexpectedly Deteriorates In January

U.S. Consumer Sentiment Unexpectedly Deteriorates In January

Consumer sentiment in the U.S. has unexpectedly deteriorated in the month of January, according to a report released by Thomson Reuters and the University of Michigan on Friday.

The report showed that the preliminary reading on the consumer sentiment index for January came in at 71.3 compared to the final December reading of 72.9.

The drop by the consumer sentiment index came as a surprise to economists, who had expected the index to climb to a reading of 75.0.

With the unexpected decrease, the index fell for the second consecutive month, hitting its lowest level since December of 2011.

The drop in consumer sentiment was partly due to dissatisfaction with the fiscal cliff negotiations, with Congress forced to reach a last-minute deal that still leaves some tough fights ahead.

Jennifer Lee, senior economist at BMO Capital Markets, said, "When one swerves at the last minute and avoids driving off a cliff, and the one in reference being the U.S. economy, it allows our heartbeats to return to normal but it does not necessarily lift confidence in the process."

"Frankly though, it is surprising that consumer confidence didn't rise at all. Not one iota," she added. "I wasn't expecting consumers to 'party like it's 3012 tonight' but the last minute deal was a last minute deal and that fact did not give much comfort to Americans, as evidenced by the latest confidence survey."

The report showed a notable decrease by the reading on current economic conditions, which fell to 84.8 in January from 87.0 in December. The drop pulled the index to its lowest level since July.

The expectations index showed a more modest decrease, edging down to 62.7 from 63.8, although it still hit its lowest level since November of 2011.

Meanwhile, the report also said one-year inflation expectations rose to 3.4 percent in January from 3.2 percent in December. The five-to-ten-year inflation outlook was unchanged at 2.9 percent.

by RTT Staff Writer

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