The consumer sentiment index from the University of Michigan rose to 92.1 in October from 87.2 in September, outstripping the 89.0 estimate in the Bloomberg survey of economists, and coming in slightly below the 93.3 average for the year.
American equities have returned smartly from their low in late September. The Dow has gained 5.6 percent to date with the bulk of the rise in the first two weeks of October. Overseas markets from China to Europe have stabilized or edged higher. Though the slowing pace of global economic growth remains a long term threat to the U.S. economy, the acute concerns of late summer have eased.
The Michigan survey’s index for consumers' expectations in six months climbed to 82.7 from September's 78.2, which had been the low for this year. The gauge of current conditions, which tracks Americans’ attitudes about their existing personal finances, rose to 106.7 in October from 101.2 last month. The average this year is 105.8.
Consumers overall expect smaller increase in payrolls going forward, perhaps reflecting the disappointing job numbers from August and September. But, perhaps surprisingly the lowest third of income earners thought that their pay over the next year would increase by the most in more than a decade. Worries about falling job prospects were evident mainly with middle income earners.
Energy prices may also have contributed to improving attitudes in the country. In September the price of a gallon of regular gasoline fell 6.5 percent according to the American Automobile Association, after declining 7.3 percent in August. Food prices though rose 0.4 percent, the largest increase since May 2014, after rising 0.2 percent the prior month.
Business conditions were expected to improve by a greater proportion of survey responders in October. The index for those expecting better business conditioning in year rose to 22 from 21 in August and the measure for those expecting worse conditions dropped to 23 from 25.
The Michigan Survey indicated that consumers showed a greater willingness to purchase big-ticket goods. The index for those stating that it was a good time to buy durable goods rose to 80 in October from 72 and the percentage voicing a negative opinion fell to 16 from 21.
Inflation expectations remain muted and essentially unchanged, running a bit ahead of current rates. Americans said they thought prices would rise 2.7 percent in the next year, down from 2.8 percent in September. Over the next five to ten years, consumers forecast that prices would rise 2.6 percent, matching the lowest predicted rate since 2002, compared with 2.7 percent gain last month.
Americans with incomes in the top third said that they were expected to use their credit cards or withdraw from savings for major purchases.
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