Consumer sentiment rose in January to its highest level since July 2021, according to the University of Michigan Survey of Consumers released Friday.
Preliminary readings showed sentiment jumped to 78.8 from 69.7 percent last month, marking the second straight month of strong increases.
“Democrats and Republicans alike showed their most favorable readings since summer of 2021. Sentiment has now risen nearly 60% above the all-time low measured in June of 2022 and is likely to provide some positive momentum for the economy,” said Survey of Consumers Director Joanne Hsu in a statement.
The rising numbers reflect growing optimism about the state of the economy as inflation eases, unemployment remains low and wages continue to rise.
President Biden struggled to sell Americans on the state of the economy throughout 2023 after more than two years of high inflation. How voters feel about the economy could loom large in Biden’s likely rematch with former President Trump, who said last week he expects the economy to crash and hopes it does so under Biden.
Trump narrowly leads Biden in early general election surveys, according to The Hill/DecisionDesk HQ poll tracker.
“Massive increase in consumer sentiment, blowing away expectations,” Bharat Ramamurti, former deputy director of Biden’s National Economic Council who recently joined the American Economic Liberties Project, wrote on X, the platform formerly known as Twitter.
“A 2024 with several interest rate cuts, continued job and wage gains, and inflation at or close to the [Federal Reserve’s] target will only drive sentiment further upwards.”
The Fed signaled it would cut interest rates later this year as long as inflation doesn’t pick up again.
During remarks at a virtual Brookings Institution event on Tuesday, Fed Governor Christopher Waller, a voting member of the Fed’s rate-setting committee, said he was “becoming more confident that we are within striking distance” of the central bank’s 2 percent annual inflation target.
“As long as inflation doesn’t rebound and stay elevated, I believe the [Federal Open Market Committee] will be able to lower the target range for the federal funds rate this year,” Waller said.