Consumer sentiment up in March: Can softening inflation further boost spirits?

The University of Michigan released its latest reading of the Consumer Sentiment Index for March of 2024. Consumer Sentiment increased from last month, reaching its highest point since July 2021.

Yahoo Finance Reporter Josh Schafer joins Market Domination to discuss the consumer sentiment report for March and what it means for the market going forward.

For more expert insight and the latest market action, click here to watch this full episode of Market Domination.

Editor's note: This article was written by Nicholas Jacobino

Video Transcript

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AKIKO FUJITA: Consumer sentiment climbed to its highest level since 2021, while overall sentiment essentially remained unchanged throughout the first quarter of 2024. Consumers perceiving the economy holding steady in its current state. Here, with more, we've got our very own Josh Schafer. I guess the question is, this data is sort of backwards looking, right? Is the sentiment still intact?

JOSH SCHAFER: It seems like it from what we can draw from this, right? It's hard to sort of draw too much further because we're not really sure, right? I think, overall, the fact that we were stable through the entire quarter is what stands out to me, Akiko. The fact that we ended sort of the first quarter more or less where we started when maybe the data throughout that quarter wasn't as strong, right?

It showed a relatively stable economy, but you could certainly find some prints in there, like an offset, or like the retail sales report in January, or one of the other inflation reports that people could have got stuck on, right? We could have seen this sentiment really tick down. So the stability there, I think, through the quarter stands out to me and sort of speaks to maybe where the overall economic data is right now.

I think the most promising part of this release today, guys, was the inflation expectations. Inflation expectations are always a very popular thing that people look for in this data, and we're showing it on your screen now. The one-year inflation expectations came down to 2.9%. That's down from the 3% expectation we saw last month. The long run came down to 2.8%, down from 2.9%.

And really, I think, what stands out about that graph you're looking at is the purple line is coming back to where it was pre-pandemic, closer to what people expected for inflation before we had this big increase, same with the long-term inflations. And that's just an important story for the Fed.

You've heard Fed Chair Jerome Powell talked about this in the past. If people expect prices to be higher, that feeds inflation, right? Because I'm going to just go to the store and pay higher prices, and inflation could stay sticky. So it's important, actually. This measure is rather important for consumers to feel like prices are going to come down and sort of fight back against higher prices.

AKIKO FUJITA: I guess it's sort of this expectation, or we've come around to this expectation that if you're talking specifically about the Fed, it doesn't necessarily-- Yes, the timing matters to a certain extent, but this idea that we are now at the end of the cycle is kind of what the focus is.

JOSH SCHAFER: And that the end is going to be the end that we want, right? That end not changing, I think, is really what stands out here, and it's in line with what the Fed said, which is always good for the Fed that consumers are sort of seeing this-- seeing things the same way.