US Consumer Sentiment Rises to Highest Since Early 2004
Consumer sentiment climbed in October to the highest level since the start of 2004 as households grew upbeat about the outlook for the U.S. economy, a University of Michigan survey showed Oct. 27.
Highlights of Michigan Sentiment for October
• Sentiment index rose to 100.7 (matching estimate) from 95.1 in September; preliminary reading for October was 101.1.
• Current conditions gauge, which measures Americans’ perceptions of their finances, advanced to 116.5 from 111.7; reading is strongest since November 2000.
• Expectations measure rose to 90.5, the highest since January 2015, from 84.4.
Key Takeaways
Gains in incomes, higher property values and stocks at a record kept sentiment about personal finances near an all-time high. More than half of all respondents in the survey said they anticipated the good times would persist in the coming year and expected the economic expansion would endure over the next five.
Improved finances were reported by 53% of all consumers this month, the biggest share since early 2000. Even more compelling was the fact that the recent gain was spread across age and income groups.
The pickup in confidence was accompanied by an increase in spending plans. Buying conditions for household durables were the most favorable since 2006 and largely due to gains among low- and middle-income consumers.
The economy, which expanded at a faster-than-forecast 3% pace in the third quarter, continues to recover from recent hurricanes with rebuilding efforts providing a boost after the initial hit. Jobless claims have fallen below their pre-storm levels, and new-home sales unexpectedly rose in September due to increased activity in the South, according to government figures released this week.
The sustained strength of consumer sentiment could be challenged if President Donald Trump and congressional Republicans fail to pass a tax cut.
Official’s Views
“The Great Recession has caused a fundamental change in assessments of economic risks, with consumers now giving greater preference to economic stability relative to economic growth,” Richard Curtin, director of the University of Michigan consumer survey, said in a statement. “This is the essential reason why consumers have voiced such positive economic assessments of such a modest pace of economic growth.”
Other Details
• Two-thirds of all homeowners reported increases in property values.
• Consumers saw probability of future stock gains as highest in more than a decade.
• Annual income gain of 2.1% was expected by consumers, up from 1.7% last month; most of the gain due to people with incomes in the bottom third.
• Consumers saw inflation rate in the next year at 2.4% after 2.7% the prior month.
• Inflation rate seen over next five to 10 years was unchanged at 2.5%.
• Almost seven in 10 consumers anticipated interest rates to rise in the coming year.
