Consumer sentiment: Positive business outlook outweighs unemployment concerns

Consumer sentiment lifted for the third straight month in February, rising a modest 3% above January, supported by a 12% improvement in consumers' outlook over the economy for the year ahead, according to the University of Michigan Surveys of Consumers. However, sentiment remains well below its historical average; in spite of the recent slowdown in inflation, overall prices are still painfully high for consumers and continue to be at the forefront of their minds, said U-M economist Joanne Hsu , director of the surveys. About 38% of consumers reported that their living standards are being eroded by inflation, down from a peak of 49% in July 2022 but still elevated relative to a year ago. "Consumers have noted both positive and negative developments in the economy,” Hsu said. "On one hand, worries about rising unemployment have emerged for some amid layoff announcements. On the other hand, labor markets continue to enjoy historic strength, supporting robust income growth. Consumers will weigh the balance of factors, focusing on implications for their own budgets, as they make decisions on spending or saving.