Sentiment a bit weaker than expected with the final December index down at 52.9 from 53.3 in the December preliminary reading but still up from 51.0 in November. The Econoday consensus looked for the final index up to 53.4. The latest reading remains down 29 percent from a year ago.

One-year inflation expectations come in at 4.2 percent in the December final which is down from 4.5 percent in November. Five-year inflation expectations are also down at 3.2 percent from 3.4 percent in November.

Year-ahead inflation expectations are down for a fourth straight month and reach the lowest in 11 months, a pleasing trend, but they remain above 3.3 percent of January. Long-run inflation expectations in the December final are the same as the January 2025 reading. This figure ranged between 2.8 and 3.2 percent last year, and were below 2.8 percent throughout 2019 and 2020.

Here is the University of Michigan's comment on its latest survey results:"While lower-income consumers posted gains, sentiment for higher-income consumers was little changed. Buying conditions for durable goods fell for the fifth straight month, whereas expectations for personal finances and business conditions rose in December. Labor market expectations lifted a bit this month, though a solid majority of 63 percent of consumers still expects unemployment to continue rising during the next year. Despite some signs of improvement to close out the year, sentiment remains nearly 30 percent below December 2024, as pocketbook issues continue to dominate consumer views of the economy."

The final December reading on consumer sentiment is expected one tick higher at 53.4 from 53.3 in the preliminary December report. That may be up from 51.0 in November but these are very weak and troubling readings, down 28 percent from a year ago.

The University of Michigan's Consumer Survey Center questions households each month on their assessment of current conditions and expectations of future conditions. Preliminary estimates for a month are released at mid-month and are based on about 420 respondents. Final estimates are released near the end of the month and are based on about 600 respondents.

The pattern in consumer attitudes and spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth.

This balance was achieved through much of the nineties and, in large part because of this, investors in the stock and bond markets enjoyed huge gains. It was during the late nineties that the consumer sentiment index hit its historic peak, reaching levels that were never matched during the subsequent 2001 to 2007 expansion nor during the long expansion following the Great Recession.

Consumer spending accounts for more than two-thirds of the economy, so the markets are always dying to know what consumers are up to and how they might behave in the near future. The more confident consumers are about the economy and their own personal finances, the more likely they are to spend. With this in mind, it's easy to see how this index of consumer attitudes gives insight to the direction of the economy. Just note that changes in consumer confidence and retail sales don't move in tandem month by month.