U.S. consumer sentiment has been improving as recent data has indicated easing inflation over the past three months. Soaring inflation has compelled people to spend cautiously and the Fed’s aggressive rate hike policy has been igniting fears of a recession.
However, the apprehensions have been waning lately, with commodity prices showing signs of cooling, which has been giving a boost to consumer sentiment. Given this scenario, stocks like InterContinental Hotels Group PLC IHG, Sportradar Group AG SRAD, OneSpaWorld Holdings Limited OSW and Six Flags Entertainment Corporation SIX are likely to benefit in the near term.
Consumer Sentiment Rebounding
The University of Michigan’s preliminary February reading of the consumer sentiment index increased to 66.4 from January’s reading of 64.9. This is the index’s highest reading since January 2022.
January’s consumer sentiment reading also came in higher than economists’ expectations of 65.0.
The index measuring current economic conditions also increased to 72.6 in February from 68.4 in January, indicating a significant improvement in consumers’ views of the state of the economy.
Understandably, consumers are more optimistic about the economy right now. The consumer sentiment index hit a low of 50.0 in June 2022 and has since rebounded substantially. Colling commodity prices have brought in a sigh of relief for consumers. Also, data shows that inflation has been easing over the past three months.
The rally in the stock market and the ongoing strength of the labor market may have spurred the improvement in consumer sentiment. This has raised hopes that the economy may have a softer landing in 2023 and ultimately avoid slipping into recession.
Also, the U.S. GDP grew 2.9% in the fourth quarter for the second consecutive quarter. Besides, the Fed increased interest rates by 25 basis points in February after increasing them by 50 basis points in December.