Consumer confidence rose in January to the highest level in seven months as low inflation helped support households, whose outlook for wage gains remained subdued.
The University of Michigan’s preliminary sentiment index climbed to 93.3, the highest since June, from 92.6 in December. The median projection in a Bloomberg survey called for 92.9. The gauge averaged 92.9 last year, the best annual performance since 2004. Last month’s advance was paced by those making more than $75,000 a year.
Americans’ projected inflation rate over the next year dropped to the lowest level since 2010, helping to give consumers added buying power. Workers are still waiting for more convincing signs of stronger wage growth, which has remained elusive even as the jobless rate lingers at a more than seven-year low.
“Consumer optimism is now dependent on the continuation of an extraordinary low inflation rate,” Richard Curtin, director of the University of Michigan consumer survey, said in a statement.
Consumer confidence estimates in the Bloomberg survey of 65 economists ranged from 89 to 95.
The current conditions index, which measures Americans’ perception of their personal finances, declined to 105.1 from the prior month’s 108.1.
The gauge of expectations six months from now increased to 85.7, the highest since June, from 82.7.
Prices Decrease
Wholesale prices in the US declined in December from the prior month, showing inflation is still well-contained as Federal Reserve officials weigh further increases in the benchmark interest rate.
The 0.2% decrease in the producer-price index followed a 0.3% gain in November, a Labor Department report showed in Washington. Over the past 12 months, wholesale prices fell 15. The PPI excluding volatile food and fuel prices climbed 0.1% from the prior month.
Businesses have gotten used to subdued wholesale costs as the plunge in fuel prices and appreciation of the dollar limit cost pressures. Policy makers, who maintain that these effects are transitory amid labor-market progress and broader economic growth, raised the benchmark interest rate in December for the first time since 2006.
“The pressures right now are towards further very low inflation,” Gus Faucher, an economist at PNC Financial Services Group Inc. in Pittsburgh, said before the report. “The assumption is that oil prices will stabilize, the dollar will stabilize and inflation will start to pick up later this year.”
The median estimate in a Bloomberg survey of 68 economists called for a 0.2% decrease. Projections ranged from a drop of 0.9% to a 0.1% advance.
Food, Energy
Food prices declined 1.3%, the most since February, according to the report. Energy costs slumped 3.45, led by a 23.4% plunge in diesel fuel that was the biggest since 1990.
Wholesale prices excluding food and energy were forecast to rise 0.1% after a 0.3% increase in November. Those costs were up 0.3% from December 2014.
Excluding food and energy and also eliminating trade services, producer costs advanced 0.2% after rising 0.1% in November. Some economists prefer this reading because it strips out the most volatile components of PPI.
The producer price gauge is one of three monthly inflation reports from the Labor Department. The consumer price index, due for release Jan. 20, showed little change in December, according to the Bloomberg survey median. A report Thursday showed the cost of imported goods declined 1.2% last month, the biggest decrease since August.
