US Consumer Sentiment Falls

FEBRUARY 15, 2021 – US CONSUMER SENTIMENT FALLS

The consumer sentiment index fell to 76.1 last week, from 79 in January, as reported by the University of Michigan. Economists had expected a slight uptick to 80.8. The results were surprising in light of the expected passage of a large stimulus bill, declining Covid infections and the roll-out of vaccines.  The data supports the view of a K-shaped recovery, where lower paid workers area losing out to those who earn more.  The decline in consumer sentiment is attributed to those earning less than $75,000.

53 percent of consumers expect the economy will remain poor through 2021.  Though, economists expect the pessimism to subside as stimulus packages and better virus numbers will allow the economy to open wider in the summer months.  A survey by the Federal Reserve Bank of Philadelphia anticipates stronger economic growth over the next 3 years, but with slower job growth.

The University of Michigan poll showed consumers expect inflation to rise in the short term to 3.3 percent, the highest it has been since July 2014.  Fed Chair Jerome Powell downplayed rising inflation, saying pent up demand will boost inflation initially, but it should stabilize.  The Fed is still targeting a 2 percent inflation rate for the long term.

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