Sentiment Boosted by Expected Fiscal Spending and Deregulation

The final December University of Michigan consumer sentiment surge to a 98.2 (was 98.0) new cycle-high extended the U.S. election-fueled November rise to 93.8 from the 2-year low of 87.2 in October. The move leaves sentiment just above the 98.1 prior cycle-high in January 2015 that marked the strongest reading since January 2004.

Friday’s 0.2 point boost follows a 2.2 election-related November hike but a 0.7 downward October drop. Analysts with Action Economics note that confidence and producer sentiment face a lift from hopes for deregulation and fiscal stimulus, a factory sector rebound in the face of rising oil prices and a reversal in the inventory headwind, gains for equity and home prices, and generally low gasoline prices despite recent oil price gains. There were downward revisions in inflation expectation readings to a 2.2% (was 2.3%) new expansion-low for the 1-year measure, and a 2.3% (was 2.5%) new all-time low for the 5-10 year measure despite rising oil prices.

By Caroline Williams