Ann Arbor Times

Consumer sentiment has shown an upward trend for the fifth month in a row, reaching its highest point since April 2024. This rise in optimism comes amid policy changes following the recent White House transition. Economist Joanne Hsu, director of the University of Michigan Surveys of Consumers, highlighted that Republican economic outlooks have improved with these shifts, while Democrats remain cautious about the future.

Hsu explained that "the two groups' contrasting views on how Donald Trump’s policies will influence the economy" reflect their differing expectations. Independents maintain a middle ground stance, contributing to an overall positive consumer sentiment moving into December. Current sentiment levels are positioned between the historic low from June 2022 and figures recorded before the pandemic.

Hsu stated, “Broadly speaking, while consumers still do not feel that they are thriving, they view the economy much more favorably than they did two years ago when inflation was at a peak.” Despite this improvement, concerns over high prices persist among consumers. New policy measures like tariff hikes raise worries about exacerbating these costs; however, there is optimism about stable gas prices benefiting holiday travel.

The Current Conditions Index experienced growth due to improved buying conditions for large durable goods. Although typically a sign of economic strength, this increase was largely driven by anticipation of future inflation rebounds. Hsu noted that 22% of consumers mentioned purchasing durables now to avoid price hikes—a significant rise from previous months.

Political affiliations influenced perceptions: many Democrats and Independents attributed future tariffs as potential price drivers, whereas Republicans were more focused on current price challenges. These political divides mirror varying expectations regarding upcoming presidential policies.

Throughout December interviews, Democrats expressed concerns over possible inflation resurgence due to policy changes; Republicans anticipated reduced inflation under new leadership. Tariffs became a notable topic during discussions this month—mentioned by 25% of participants compared to lower percentages in prior months—and were generally viewed negatively.

In terms of indices performance: The Consumer Sentiment Index climbed to 74.0 from November's 71.8 and last December's 69.7; The Current Index rose significantly from November's 63.9 to 75.1; However, The Expectations Index decreased slightly to 73.3 from November’s 76.9 but remained above last year's figure.

The Surveys of Consumers conducted by the University of Michigan Institute for Social Research relies on nationally representative samples through web-based interviews throughout each month.