University of Michigan's Index of Consumer Sentiment posts final February reading of 62.8, down from January's 67.2; descent a result of inflationary declines in personal finances, rising interest rates, falling confidence in government economic policies

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February 25, 2022 (press release) –

Final Results for February 2022

                                                       Feb     Jan      Feb      M-M        Y-Y
                                                      2022    2022   2021   Change  Change
Index of Consumer Sentiment        62.8    67.2    76.8    -6.5%    -18.2%
Current Economic Conditions         68.2    72.0    86.2    -5.3%    -20.9%
Index of Consumer Expectations    59.4    64.1    70.7    -7.3%    -16.0%

Next data release: Friday, March 11, 2022 for Preliminary March data at 10am ET

Read our January 12th report: The Partisan Economy

Read Dr. Curtin's latest paper, Nonconscious cognitive reasoning: A neglected ability shaping economic behavior.
Surveys of Consumers chief economist, Richard Curtin
Although Consumer Sentiment posted a slight increase in the last half of February, it still remained at its lowest level in the past decade, and the loss was still entirely due to a 12.9% decline among households with incomes of $100,000 or more. The February descent resulted from inflationary declines in personal finances, a near universal awareness of rising interest rates, falling confidence in the government's economic policies, and the most negative long term prospects for the economy in the past decade (see the chart). Virtually all interviews were conducted prior to the Russian invasion so its impact is yet to be felt by consumers. The most likely linkage to the domestic economy is through rising energy prices, with the size and length of the potential increases subject to substantial uncertainty. This will complicate the Fed's policy actions, tilting their objectives to focus more on inflation at the cost of slower growth and higher unemployment. The financial harm and growing angst among consumers about rising inflation have pushed nearly nine-in-ten consumers to anticipate interest rate hikes. The Fed's clinging to the transient hypothesis meant missed opportunities to nip inflation at its earliest stages; aggressive actions are now needed to avoid the potential establishment of an inflationary psychology that acts to form a self-fulfilling prophecy. The imposition of sanctions against Russia is likely to generate counter measures that could harm the domestic economy, requiring the Fed to give special consideration to any associated economic slowdown and rising unemployment. Presumably, economic sanctions would be lifted only if Ukraine's sovereignty is maintained, but not if Russia prevails. Consumers may double-down on precautionary behaviors if the greater cyber risks associated with the conflict are now borne by domestic households.

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