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First Cut: Preliminary Consumer Sentiment Index climbs in December to second highest this year

The University of Michigan Consumer Sentiment Index climbed to 99.2 in December, the second highest for 2019 after the 100.0 in May. Consumers’ perceptions of current conditions at 115.2 was the strongest since the 116.1 in December 2018. The outlook for six months from now rose to 88.9, its highest since 90.5 in July. Consumers are largely ignoring political news and focusing on the favorable labor market and rising incomes

Inflation expectations remained consistently at the low end of readings. The 1-year measure was down a tenth to 2.4%, matching the historic low of 2.4% in October 2017. The 5-year measure was also at an historic low at 2.3%, but not out of line with the expectations for the past year. I would anticipate a little upward revision in the final report at 10:00 ET on Friday, December 20.  However, as long as household energy costs remain at comfortable levels and relatively stable, inflation expectations probably will not budge from their present tame outlook.

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