Consumer sentiment fell in January, dropping to 74.2 from a previous-month reading of 74.5 in the Thomson Reuters/University of Michigan report released Friday. The decline was driven by concerns about rising prices. The current conditions index, a survey of consumers’ willingness to buy big-ticket items, dropped to 81.8 from 85.3 in December.
The index of consumer expectations, a survey of future consumer expectations, increased to 69.3 from 67.5 in December. Consumers expressed optimism about employment growth. Just 22% of respondents said they think the unemployment rate will increase in 2011, the lowest level in more than a decade. Consumers also said they were worried about inflation diminishing their financial prospects.
“This report is good news since it is pointing to renewed consumer sentiment in the last half of the month despite rising gasoline and food prices,” said Chris G. Christopher, Jr., senior principal economist at IHS Global Insight. “We expect the consumer momentum that has been building up over the last couple of quarters of 2010 to spill over into 2011, despite the recent increases in gasoline and food prices.”