Consumer Sentiment at the Highest Since October 2007

Written by: Scott Sery

The Consumer Sentiment report from Reuters/ University of Michigan shows yet another increase in consumer confidence.  The index is up to 79.3, a rise of 2.9 since April, and 1.5 since the survey two weeks ago.  This latest jump adds to the continued long-term increase in consumer confidence, hitting the highest point since October of 2007.

Favorable job growth over the last few months is one of the main reasons for the increase in consumer confidence.  Although job growth is believed by many to be modest over the coming years, the labor market feels that wages should continue to increase and jobs should become more readily available in the future.  This leads to an overall positive economic outlook, and is helping to spur sales of household durable goods and new vehicles.  All of which in turn lead people to feel the economy is on the right track and looking upward.

There are many things that consumers can be worried about.  Gas prices have fallen slightly, but only after a large increase.  Despite the high costs at the pump, consumers do not appear to be worried about future increases in the cost of gasoline.  The European financial crisis has many investors worried and the woes over there are stifling U.S. markets.  Consumers, on the other hand, see this as having little affect on the American economy, and have all but passed the crisis off as unimportant in their lives.  While political debate is often a source of great consumer frustration, it appears as though consumers have learned to ignore politicians arguing.  Until something actually happens, such as new tax policies, there is little concern for what is happening in Washington.

Consumers are remaining upbeat about the U.S. Economy.  Since many of the numbers, including jobless claims, an increase in home sales, and a positive outlook from the FOMC, are all indicators that the economy is indeed recovering.  The growth is slow and steady, and how far we have come can truly be seen by comparing year over year numbers.  Chief economist Richard Curtin says, “The most likely prospect is that… confidence remains largely unchanged until after the November election…”  Until something big comes along and could upset the growth, consumers should remain positive.

The consumer sentiment index is compiled via telephone surveys of 500 households twice per month.  The households are asked to rate how they feel the outlook is on U.S. Economy.  These numbers are compiled by Thomson Reuters and The University of Michigan and released to the public early and late each month.


Consumer Sentiment at the Highest Since October...

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