Consumers expect inflation to increase at the slowest pace since early 2021, indicating Americans have grown more confident in the economy despite the post-pandemic financial headwinds many businesses continue to face.
According to the December 2023 consumer sentiment survey published by the University of Michigan, American shoppers anticipate inflation will rise 3.1% in 2024, still elevated from the Federal Reserve’s target rate of 2% but down from expectations of 4.5% in November.
The shift coincides with growing optimism toward the general economy, with attitudes improving 13% after four consecutive months of decline. The University of Michigan tracks changes in consumer sentiment via an index, which offers a preliminary score of 69.4 for this December. That number is 39% higher than the index’s lowest score on record, 50.0, which was published last June.
While these initial numbers for December reflect improving optimism among consumers, they conflict with last month’s attitudes among small business owners. According to the National Federation of Independent Business (NFIB), entrepreneurs felt more pessimistic in November, with confidence falling by 0.1 points. Among the NFIB’s survey respondents, 22% cited inflation as the largest threat to their enterprises, the same as in October but down 10 points from last year, while 44% claimed to have encountered difficulties filling positions despite an ongoing surge in job growth.
Overall, it appears that small business owners remain concerned about their financial futures, even though their attitudes toward several factors, notably inflation, improved on an annual basis.
Although these two reports focus on different groups and time periods, they are comparable enough to suggest that consumers and small business owners share differing perspectives on the post-pandemic economy as a whole. However, one area both demographics seem to agree on is inflation.
While shoppers may have grown more optimistic in recent weeks, perhaps in response to a slew of positive economic reports in November, it is evident that they expect consumer prices to remain higher than they were before 2020, as do entrepreneurs, who remain largely unswayed by an improving job market and hopeful inflation forecasts.
But even if both groups believe more effort is needed to reach a stable economy, the data suggests that Americans feel better about their financial futures now than they did last year, highlighting the progress the U.S. has made in only 12 months.