The US consumer sentiment reached its highest level in over two years in March, which is positive news for the economy and President Joe Biden.
All About US Consumer Sentiment
The University of Michigan Consumer Sentiment Index, which measures US Consumer Sentiment, increased to 79.4 in March, higher than the initial reading of 76.5.
This is a 28.1% increase from a year ago and is the highest level recorded since July 2021, before the United States faced its significant inflation challenges.
Year-ahead US consumer sentiment expectations have improved as well. The index for US consumer sentiment expectations has increased to 77.4 in March, up from 75.2 in February. Short-term inflation expectations have decreased to a range of 2.3% to 3.0%, similar to levels seen in 2018 and 2019.
The recent improvement in the US consumer sentiment will be a sign of relief for President Biden, who has been working to convince voters that his management of the economy deserves another term. Although key economic indicators such as the job market, unemployment rate, and GDP have been strong, concerns about inflation and public perceptions of the economy have led some voters to have a less positive view of Biden.
If the US consumer sentiment continues to improve, it could lead to higher approval ratings for Biden and increase his chances of being reelected. However, currently, his approval ratings are not very positive. A recent CNBC survey revealed that Biden’s economic approval ratings are only at 37%, which is an increase from 33% in December.
Survey director Joanne Hsu said that consumers are confident that inflation will keep decreasing. Assessments and expectations about personal finances have slightly improved from last month, as concerns about high prices and living expenses have declined.
Hsu mentioned that although US consumer sentiment has increased again, it has been quite consistent throughout the first quarter of this year. This stability in US consumer sentiment shows that consumers are seeing the economy as staying fairly steady in its current state.
However, as the election season moves forward and discussions about economic policies become more important, consumers’ views on the economy could become more unpredictable in the coming months.
The recent reading suggests that the slowing down of inflation pressures might be starting to reach consumers. For almost two years, consumers have been dealing with high inflation rates. Since March 2022, the Federal Reserve has been increasing interest rates to fight against inflation, which hit a high of around 9% in June 2022 and has since decreased to 3.2%.
These latest US consumer sentiment readings show the progress that the Federal Reserve has made in its battle against inflation. However, the main question is when the Federal Reserve will start lowering interest rates. Many investors expect a rate cut by now, just a few months ago in December.
According to the CME Group’s FedWatch tool, the most likely time for this rate cut is in June or possibly at the Fed’s late July meeting. Despite the high interest rates, the overall economic performance has been strong, and this week’s latest gross domestic product (GDP) report brought more positive news.
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