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Michigan Inflation Expectations Give Fed Time; Sentiment Rises

Published 02/15/2019, 10:00 AM
Updated 02/15/2019, 10:13 AM

Investing.com - U.S. consumer sentiment improved in February, recovering from a near-two-year low measured as the partial government shutdown increased worries about economic growth, while inflation expectations at a 50-year low gave the Federal Reserve more ammunition to keep rates on hold.

The preliminary publication of the data for February from the University of Michigan's Consumer Survey Center showed that the consumer sentiment index increased to 95.5 from 91.2 a month earlier.

Economists had forecast a rise to 93.3.

“The early February gains reflect the end of the partial government shutdown as well as a more fundamental shift in consumer expectations due to the Fed's pause in raising interest rates,” the surveyor’s chief economist Richard Curtin said.

The recovery marks a sharp contrast to recent economic data that has exacerbated concerns about an economic slowdown.

Data on Thursday showed that U.S. retail sales recorded their biggest drop in more than nine years in December. That came alongside an unexpected increase in the number of Americans filing claims for unemployment benefits last week, which pushed the four-week moving average of claims to a one-year high, an indication that job growth was moderating.

At the same time, inflation seemed to be held in check, with the consumer price index flat compared to the prior month and core readings holding steady, while the producer price index registered its second-consecutive drop month on month.

Along those lines, Curtin noted that the survey revealed that consumers' long-term inflation expectations fell to the lowest level recorded in the past half century.

“The data suggest that the Fed will find it even harder to justify another rate hike given the record low inflation expectations,” he added.

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