Consumer sentiment surged in October, reaching its highest level since the start of 2004, according to the University of Michigan’s survey of consumers. This was only the second time that the Sentiment Index was above 100.0 since the end of the record 1990’s expansion.
The October gain was due to the most favorable assessments of the financial situation of consumers since 2000.
In addition, the majority of consumers reported that the national economy continued to expand, which they have done in every survey conducted in 2017. To be sure, consumers don’t anticipate accelerating growth rates but rather anticipate the uninterrupted continuation of the slower pace of growth that has characterized this recovery.
Recently improved finances were reported by 53% of all consumers in October, the highest proportion since the start of 2000. When asked to explain how their finances had improved, gains in incomes and wealth were mentioned by the majority of all households. Two-thirds of all homeowners reported increases in their home’s value, and the probability of future stock gains was judged the highest in more than a decade. When asked about their financial prospects for the year ahead, consumers were still quite optimistic. An annual income gain of 2.1% was expected in October, up from 1.7% last month and 1.5% in last October’s survey.
The majority of consumers reported ongoing gains in the national economy in each survey conducted in 2017.
Although accelerating gains in economic growth are not anticipated, it still meant that 55% of all consumers expected good times in the economy as a whole during the year ahead, and more importantly, 51% of all consumers anticipated the expansion would continue uninterrupted over the next five years. This optimistic outlook was accompanied by nearly seven-in-ten consumers who anticipated small increases in interest rates during the year ahead. The unemployment rate was also anticipated to continue to inch downward during the year ahead.