00:00 Speaker A
Consumer sentiment data is coming in worse than expected today. The final reading on December consumer sentiment from the University of Michigan actually came in lower than the previous reading and below where Wall Street had predicted those numbers. Joining us now, Joanne Shue, University of Michigan Director of Consumer Research. Joanne, good to see you. Um, so when you have a reading, you review this number every month. You come up with the preliminaries and then the finals. When you see this kind of change during the month, what does it usually do, why does it usually happen?
00:41 Joanne Hsu
In the case of December, the change was very, very small. In both the preliminary reading and the final reading that we released today, we saw a very modest improvement from November that was actually not outside the margin of error. So it is essentially a read without change. Um, we have some, um, some aspects of the economy where consumers have reported some slight improvement. Uh, we have a slight improvement in labor market expectations, um, some improvement in business conditions, uh, but overall, consumers, even though they think we’re a little better than November, they still think we’re a lot worse than we were at the beginning of the year.
01:19 Speaker A
And to that point, Joanne, it hit me as I was looking at your final results for December. Just to take a step back here. Okay, so the number in December, 52.9. A year ago at this time, we were at 74. That’s just a noticeable deterioration in sentiment over 12 months, isn’t it? I mean, how often do we see that kind of fall in that time period?
01:54 Joanne Hsu
This is a very substantial reduction over a relatively short period of time. Um consumers are loud and clear that they believe that the outlook for the economy has declined quite a bit since the beginning of the year. A large part of this is due to the confusion and uncertainty that has arisen from the tariff policy. Um in May and June, we had more than two-thirds of consumers, about two-thirds of consumers spontaneously mention the tariffs at some point during the interview. Um and that led to um tariff the development with tariffs led to uh a lot of worry that inflation was going to increase again and it was going to throw the economy into chaos. Um, you know, in the middle of the year, consumers were generally expecting the worst case scenario, something really catastrophic. Obviously, we see that it didn’t come to fruition at this time, um and that amounted to, you know, some improvement in sentiment since then. Um, however, consumers don’t think we’re out of the woods. Um, even though their inflation expectations have come down, um, for four straight months now, I think for short-term inflation expectations, um, we still, their inflation expectations are still higher than they were in 2024. So consumers just don’t think we’re out of the woods yet.