Consumer Sentiment Rises to Highest in 14 Months
American consumer confidence rose to the highest level in more than a year in September, as households’ views on the outlook for the economy brightened.
The Thomson Reuters/University of Michigan preliminary consumer sentiment index rose to 84.6, the highest reading since July 2013, from 82.5 the month before. The median estimate in a Bloomberg survey of 65 economists projected an increase to 83.3.
Continued progress in the labor market, gains in stock portfolios and a decline in gasoline prices have buoyed household confidence in recent months. Improving outlooks may mean Americans feel more comfortable about boosting their spending, which accounts for 70% of the economy.
“Consumer sentiment is beginning to increase, and that is a reflection of the improving employment situation, and lower gas prices are a plus as well,” said Michelle Girard, chief U.S. economist at RBS Securities Inc. “We’re more upbeat about the consumer than we have been because the pieces finally do seem to be falling together.”
Forecasts for the Michigan index in the Bloomberg survey ranged from 81 to 89.5. The index averaged 89 in the five years before December 2007 and 64.2 in the 18-month recession that ensued.
The sentiment survey’s current conditions index, which measures Americans’ assessment of their personal finances, fell to 98.5 this month from 99.8. The measure of expectations six months from now climbed to 75.6 from 71.3 in August. The increase was the biggest since April.
Americans expected an inflation rate of 3.0% in the next year, down from 3.2% in August. Sustained progress in the labor market may be underpinning some Americans’ attitudes.
While payroll growth slowed in August, a six-month hiring spree this year has put more than 1.4 million Americans to work. Companies added 142,000 employees last month, the fewest since December, while the unemployment rate fell to 6.1% from 6.2% as Americans left the workforce.
Meanwhile wage growth has been hard to come by throughout the recovery, with average hourly earnings rising 0.2% in August from the prior month. They were up 2.1% over the past 12 months, in line with the average since the expansion began in June 2009.
