After showing U.S. consumer sentiment at a thirteen-year high in the previous month, the University of Michigan released a report on Friday showing that consumer sentiment has pulled back by more than expected in February.
The preliminary report showed that the consumer sentiment index dropped to 95.7 in February from the final January reading of 98.5. Economists had expected the index to edge down to 97.9.
The bigger than expected decrease by the index came after it reached its highest level since January of 2004 in the previous month.
Despite the decline, the survey's chief economist Richard Curtin said, "To be sure, confidence remains quite favorable, with only five higher readings in the past decade."
The pullback by the headline reflected a deterioration in consumer expectations, with the index of consumer expectations falling to 85.7 in February from 90.3 in January.
The current economic conditions index showed a much more modest decrease, edging down to 111.2 in February from 111.3 in January.
Curtin said the data continues to show a significant partisan divide, with Democratic expectations close to an historic low but Republican expectations near an historic high.
"While currently distorted by partisanship, the best bet is that the gap will narrow to match a more moderate pace of growth," Curtin said.
He added, "Nonetheless, it has been long known that negative rather than positive expectations are more influential in determining spending, so forecasts of consumer expenditures must take into account a higher likelihood of asymmetric downside risks."
On the inflation front, one-year inflation expectations climbed to 2.8 percent in February from 2.6 percent in January, while five-year inflation expectations dipped to 2.5 percent from 2.6 percent.
by RTT Staff Writer
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