Consumer confidence in the U.S. rose to a five-month high in December, indicating Americans will keep spending early next year.
The Thomson Reuters/University of Michigan final index of consumer sentiment climbed to 82.5 from 75.1 in November. Economists in a Bloomberg survey called for 83, according to the median projection. The preliminary reading for December was 82.5.
A pickup in employment, higher property values and stock-market gains (CME:SPH14) are bolstering household wealth and underpinning sentiment. Another report today showed the improvement is translating into more consumer purchases, which account for almost 70% of the economy.
“Sentiment is getting a lift from a better job market and rising equity prices, and there’s been some good news on the policy front,” Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, said before the report. “Consumers will respond to this.”
Estimates in the Bloomberg survey ranged from 77 to 85. The index averaged 89 in the five years leading up to the slump that began in December 2007, and 64.2 during the 18-month recession that ended in June 2009.
Other figures today showed personal spending increased 0.5% in November after a 0.4% gain that was larger than initially reported, according to the Commerce Department. After adjusting the data for inflation, purchases also climbed 0.5%, the biggest advance since February 2012.
The Michigan sentiment survey’s current conditions index, which takes stock of Americans’ view of their personal finances, rose to a five-month high of 98.6 in December, from 88 in November.
The measure of expectations six months from now increased to 72.1 from 66.8 last month.
Americans expect an inflation rate of 3% over the next year, compared with 2.9% in the prior month. Over the next five years, they expect a 2.7% rate of inflation, down from 2.9% seen in November.
Cheaper fuel is providing relief to households. The cost of a gallon of regular-grade gasoline averaged $3.25 in the first 20 days of December, compared with the 2013 high of $3.79 reached on Feb. 26.
Today’s Michigan survey figures are consistent with other confidence measures reported recently. The Bloomberg Consumer Comfort Index for the week ended Dec. 15 jumped to the highest level since September.