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Consumer Sentiment: Sharply Lower

February 12, 2021
Bottom Line:  Consumer confidence fell sharply in the preliminary February reading, led by declines among lower-income households.  Among those surveyed with incomes in the bottom third, just 23% reported improved finances, the lowest since 2014; in contrast, among those with incomes in the top third, 54% reported their finances had improved.  Despite a high probability of another new stimulus program that would include direct payments to almost all households earning below $200k, most survey respondents reported viewing the prospects for the national economy as less favorable.  Finally, despite feeling less positive on economic growth, consumers reported their highest expectations for year-ahead inflation in over six years, likely driven by a sharp increase in gasoline prices this year. Overall, while we should keep in mind this is a preliminary reading with small sample size, this is a concerning turn lower in consumer sentiment.
Consumer Sentiment FELL by 2.8 points in early February to 76.2%, compared with market expectations for an increase to 80.9%.   With this month's modest decline, sentiment is now 24.6% BELOW its year-ago level.
Current Conditions FELL by 0.5 points to 86.2%. This is 24.9% BELOW their year-ago level.
Consumer Expectations FELL by 4.2 points to 69.8%.  With this month's modest decline, expectations are 24.2% BELOW its year-ago level.