Consumer confidence soared unexpectedly to an eight-month high in September as lower fuel prices soothed inflation fears and made Americans more hopeful about the economy, a survey showed on Friday (Sept. 12).
The Reuters/University of Michigan Surveys of Consumers said its preliminary index of confidence jumped to 73.1 in September, the highest since January, from 63.0 in August, for the biggest monthly jump since January 2004.
September’s reading was well above economists’ median expectation of 64.0, according to a Reuters poll.
The sunnier mood can be traced mostly to lower prices at the gas pump and consumers’ one-year inflation expectations plunged to 3.6 percent, matching February’s low, from 4.8 percent last month, according to the survey.
According to the survey, only two extraordinary events in the past quarter century have prompted such a steep one-month decline in inflation expectations: Hurricane Katrina in 2005 and the September 11, 2001, attacks on the United States.
“We were anticipating that lower energy prices would boost consumer sentiment but that the deteriorating job market would hold it down, but it appears that more consumers benefit from lower energy prices,” said Gary Thayer, senior economist at Wachovia Securities in St. Louis.
The report’s five-year inflation expectation fell more modestly to 2.9%, from 3.2% in August.
Also encouraging, the report’s index of current conditions rose to 76.5, from 71.0 in August, while the index of consumer expectations jumped to 70.9 from 57.9 in August, the largest monthly jump in that reading since March 1991.
While expectations have brightened, U.S. households remain defensive when it comes to spending, and the report said nine in 10 consumers think the economy is in recession.
“Consumers still voiced cautious expectations for job and income growth, and indicated no change in their spending plans,” survey director Richard Curtin said.
The report did show, however, that for the first time in 20 months, more consumers expected the pace of economic growth to increase over the next year than to decrease.
“At best, the data represent the first tentative indication of a rebound in consumer spending in early 2009,” Curtin said.