Nothing scary in the latest monthly reading of consumer sentiment by the University of Michigan, which Friday registered the highest level since July 2007.
The survey on sentiment, conducted with Thomson Reuters, exceeded analyst expectations and bodes well for retail sales in the coming months.
“The October gain was due to improved personal finances as well as a more favorable outlook for the overall economy,” the monthly report said. “Indeed, consumers reported the most favorable personal financial expectations as well as the most positive year-ahead outlook for the national economy in the past seven years.”
Consumers did not appear worried by the slowdown in the global economy, the widening conflict in Syria or the spread of a scary disease.
“Consumers have not overreacted to the negative news of a global slowdown or Ebola nor to the positive news of lower gas prices. Instead, consumers have kept their focus on improved job and wage prospects,” said Richard Curtin, chief economist for the Survey of Consumers. “Finally, five years after the start of the recovery, consumers have begun to adopt the expectations and behaviors that have driven past expansions.”
The reading of consumer sentiment came amid other good economic readings. The Chicago purchasing managers’ index, also released Friday, was much stronger than expected by analysts and pointed to more robust manufacturing numbers in the months ahead. The index rose to 66.2 percent in October from September’s 60.5 percent reading.
Part of what’s driving an upbeat mood for manufacturing is falling energy prices, “which we view as a positive for the overall economy,” said economists at forecaster RDQ Economics in New York.
Also Friday, the Commerce Department reported that personal income rose by a modest annual rate of 0.2 percent in September, slightly below analyst expectations, while wages and salaries rose by the same amount. But real consumer spending fell 0.2 percent in the month. It’s a figure analysts suspect will improve in October thanks to falling gasoline prices.
“Gasoline price relief significantly increases consumer mood and our research indicates that elevated levels of consumer confidence is a plus for spending on durables and clothing,” said Chris Christopher, director of consumer economics for forecaster IHS Global Insight, in a note to investors. “We expect spending to rebound in October and the fourth quarter as a whole is looking significantly better than the third quarter.”
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