(Bloomberg) — Americans’ confidence rose in December to an almost eight-year high, pointing to a pickup in holiday-related purchases.
The Thomson Reuters/University of Michigan preliminary December index of consumer sentiment increased to 93.8, the highest since January 2007, from 88.8 last month. The median projection in a Bloomberg survey of economists called for an increase to 89.5.
Gasoline prices approaching $2.50 a gallon on average are freeing up disposable income at just the right time for merchants during their busiest time of the year. Consumer optimism about the economy, also spurred by hiring and wage growth, indicates further spending gains after a November retail sales increase that was the strongest in eight months.
“Everything is pointing in the right direction for the consumer,” said Paul Ashworth, chief U.S. economist at Capital Economics NA in Toronto, who predicted the confidence index would rise to 94. “We expect a pretty good run for consumption growth in the fourth quarter. It is a big boost for the economy.”
The consumer sentiment index averaged 89 in the five years before December 2007, when the last recession began. And it averaged 64.2 in the 18-month contraction that followed.
The Michigan Index’s gauge of current conditions, which measures Americans’ views of their personal finances, increased to 105.7, the highest since February 2007, from 102.7, today’s data showed.
Consumer Expectations
The gauge of Americans’ expectations about the economy six months from now rose to 86.1 in December, also the strongest since January 2007, from 79.9 last month. It marked the biggest one-month gain since May 2013.
Consumers in the survey forecast the annual inflation rate will increase to 2.9 percent five years from now, rebounding from a five-year low of 2.6 percent in November.
Stocks fell, while commodity producers led European equities to their worst week since 2012 as crude oil extended declines below $60 a barrel. The Standard & Poor’s 500 Index dropped 0.5 percent to 2,024.81 at 10:21 a.m. in New York.
Today’s figures corroborate Bloomberg’s measure. The weekly Consumer Comfort Index last week climbed to the highest level since 2007. Measures on the economy and buying climate were also the strongest in seven years.