US: Consumer Confidence rises in January buy it may not translate into a spending surge – Wells Fargo

Data released on Friday showed a significant increase in Consumer Confidence in January according to the preliminary report from the University of Michigan. Analysts at Wells Fargo point out the 64.6 reading for consumer sentiment in January marks the top print in the past year. The see that the relief on the inflation front and wage growth are lifting spirits, but warn the still-sour buying conditions suggest the good vibes in this report may not translate into a spending surge.

Key quotes:

“Consumers may not feel awesome about their finances, but they are undoubtedly less worried than they were when gas prices were north of $4/gallon and wage growth wasn't keeping up with inflation. Current assessments of personal finances surged 16% to its highest reading in eight months thanks to higher incomes and easing inflation...and a bit of a bounce in the stock market certainly did not hurt either.”

“The euphoria did not extend to the housing market. Home buying conditions improved slightly but are still very near the lowest levels on record. Elsewhere, buying conditions improved somewhat in January, potentially on the back of some recent reprieve in inflation, but a majority of households still view it as a bad time to buy a major household item or vehicle. We take this as a sign that higher financing costs are weighing on the purchases of these traditionally bigger ticket items. More plainly, the good vibes in this report may not translate into a spending surge.”

“The consumer price data for December showed signs that inflation is continuing to slow and thus suggest the Fed will slow the pace of tightening at its next policy meeting on February 1 by electing to bring the federal funds rate up just 25 bps.”