The Reuters/University of Michigan survey is out with its preliminary January reading on consumer sentiment. Its sentiment index came in at 71.3, which is rather disappointing. Make that extremely disappointing. The December reading was 72.9 and November’s final reading was 82.7, making this the worst reading in more than a year. Bloomberg had a consensus reading that was expected to rise to 75.0, and the range from economists was 72.5 to 84.0.
Investors might be surprised here because this is after the result of the fiscal cliff aversion and after a recovery had been seen in stocks. There was a huge disparity between the Now and the Tomorrow, as the current index was 84.8 and the expectations was down at 62.7.
We would remind investors that this survey is considered too small of a sample by our count to be as representative of a true consumer confidence reading. The flip side of that argument is that this at least one of the first real-time readings that shows an outlook for the month. Also, investors will try to use the “January effect” argument as well that the sentiment set in January is likely to set the tone for the year.