Consumer sentiment in the US rose in January to its highest level since July 2021, according to final results from the University of Michigan Survey of Consumers released today.

The index of consumer sentiment rose to a reading of 79.0 in January from 69.7 in December 2023, marking the second consecutive month of significant increase after recording 61.3 in November.

The latest reading was above the forecast of 78.8, Advisor Perspectives reported.

“Consumer sentiment confirmed its early month reading, surging 13% to reach its highest level since July 2021, reflecting improvements in the outlook for both inflation and personal incomes,” Surveys of Consumers Director Joanne Hsu said in a press release.

 “January’s gain has been exceeded only five times since 1978, one of which was last month at an even larger increase of 14%.”

 Hsu noted that consumers expressed gains in their views on their personal finances and the macroeconomy; the short-run business outlook soared 27%.

Meanwhile, year-ahead inflation expectations eased in January to 2.9%, down from 3.1% in December and 4.5% in November. This is the lowest reading since December 2020 and is now within the 2.3% to 3.0% range seen in the two years before the pandemic. On the other hand, long-run inflation expectations remained unchanged from last month at 2.9%.

“After reserving judgment last fall about whether the slowdown in inflation would persist, consumers now feel assured that inflation will continue to soften,” Hsu said. “Sentiment has resumed the upward trajectory from the all-time low measured in June of 2022, which had stalled in the late summer and fall of 2023.”

However, consumers expressed considerable disagreement about the economy’s future, with 41% expecting good times in the year ahead for business conditions, while 48% expect bad times.