Low Fuel Price Boosts Consumer Sentiment to 11 Year High

Consumer confidence jumped in January to the highest level in 11 years as steady job gains and plunging gas prices brightened the outlook for U.S. households.

The University of Michigan preliminary consumer sentiment index rose to 98.2, the highest since January 2004, from a final reading of 93.6 in December. The median estimate in a Bloomberg survey of 70 economists projected an increase to 94.1.

Trips to the pump that are costing less and less and job gains that have accelerated are helping Americans feel more optimistic about the economic recovery, now in its sixth year. Continued gains in confidence combined with stronger wage growth will be needed to embolden consumers to go out and spend their savings on purchases from vehicles to homes.

“The consumer is in very good shape,” Ryan Sweet, senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, said before the report. “They’re getting a significant tailwind from lower gasoline prices, the job market is improving, stock prices are trending higher and house prices are rising.”

Forecasts for the Michigan index in the Bloomberg survey ranged from 91 to 99. The index averaged 84.1 last year.

The sentiment survey’s current conditions index, which measures Americans’ assessment of their personal finances, increased to 108.3 this month, the highest since January 2007, from 104.8. The measure of expectations six months from now rose to 91.6 from 86.4 in December.

via Bloomberg

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency
trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza