Consumer Sentiment Beat Forecasts in November as Inflation Expectations Eased

U.S. consumer sentiment rose to 51.0 in early November, beating forecasts for a decline, as households' inflation expectations cooled.

Economists surveyed by The Wall Street Journal had expected the index to decline to 47.5.

The reading rose 3.0 points from October's final 48.0. October's final reading was the second-lowest final reading on record.

Both halves of the survey improved

The current conditions index, which tracks how households judge their finances and buying conditions today, rose to 51.0 from 46.7 — a gain of 9.2%.

The expectations index, which looks ahead, rose to 50.9 from 48.8. The survey said improvements in expected personal finances and business conditions were concentrated primarily among independents.

Inflation expectations cooled

Households expect prices to rise 4.3% over the next year, down from 4.7% in October. The survey called that the lowest reading since August.

Long-run expectations, covering the next five to ten years, eased to 3.4% from 3.5%. Both measures remain well above their pre-conflict levels.

The long-run measure matters because the Federal Reserve watches it as a check on whether households still expect inflation to settle. A reading stuck above its pre-conflict range argues they do not, yet.

Year-ahead expectations stood at 3.4% in February, before the Iran conflict began. Long-run expectations ran between 2.8% and 3.2% through 2024.

Prices still dominate households' thinking

About 57% of consumers spontaneously said high prices have eroded their living standards. That is the highest share since May, up from 46% in February.

Sentiment fell 5% among consumers with the largest stock portfolios, after a turbulent period in stock markets. It lifted for lower- and middle-wealth consumers.

Comments also revealed growing anxiety over a possible AI bubble. The survey's director, Joanne Hsu, said those worries were dwarfed by cost-of-living concerns.

A rebound that still leaves sentiment near record lows

The index's record low is 44.8, set in May. November's 51.0 is level with a year ago and remains 10% below February, before the Iran conflict.

Households' gloom has persisted even as hiring held up. This morning's jobs report showed employers added 165,000 jobs in October, more than double the forecast.

What remains unknown

Whether the final November reading holds the gain is unresolved. Interviews for the preliminary ran from October 20 to November 2, before Tuesday's election results were known, and the final adds post-election interviews.

The release noted that in the two months before the election, more than two-thirds of consumers expected Democrats to win the House. Over half expected the same for the Senate.

Whether inflation expectations keep easing is also open. The preliminary survey is an early, smaller sample, and its readings can be revised in the final release.

What to watch: the final November sentiment release on November 20, Tuesday's October consumer price index, and the Federal Reserve's December meeting.