The surge in US household confidence propelled by a strengthening job market and lower fuel costs improves the odds that gains in spending will soon follow.
The University of Michigan preliminary consumer sentiment index for January rose to an 11-year high of 98.2, exceeding the median forecast of economists surveyed by Bloomberg, from a final reading of 93.6 the prior month, according to a report Friday.
Other figures from government agencies in Washington showed consumer prices fell and manufacturing output cooled.
Increases in employment and a drop in gasoline prices were on the minds of more Americans this month than at any time in the more than five-decade history of the Michigan survey. Consumers also said they were more likely to buy a car, a sign that the December slump in retail sales may prove temporary.
“The economy is on a solid footing beginning the new year,” said Brian Jones, a senior US economist at Societe Generale, whose confidence forecast was the closest in the survey. “We continue to generate jobs at a fairly rapid clip, and what you’re also seeing is consumers’ response to what I call a tax cut from lower gasoline prices. That frees up a lot of spending and that means they can purchase other goods and services.”
The median estimate in the survey of 70 economists projected the Michigan index would increase to 94.1. The median hasn’t been so far below the actual reading since March 2013. Forecasts ranged from 91 to 99.
