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Consumer sentiment in US rose in january to seven-month high

Friday, January 15, 2016 - 23:37

[WASHINGTON] Consumer confidence rose in January to the highest level in seven months as low inflation helped support households, whose outlook for wage gains remained subdued.

The University of Michigan's preliminary sentiment index climbed to 93.3, the highest since June, from 92.6 in December. The median projection in a Bloomberg survey called for 92.9. The gauge averaged 92.9 last year, the best annual performance since 2004. Last month's advance was paced by those making more than $75,000 a year.

Americans' projected inflation rate over the next year dropped to the lowest level since 2010, helping to give consumers added buying power. Workers are still waiting for more convincing signs of stronger wage growth, which has remained elusive even as the jobless rate lingers at a more than seven- year low.

"Consumer optimism is now dependent on the continuation of an extraordinary low inflation rate," Richard Curtin, director of the University of Michigan consumer survey, said in a statement.

Consumer confidence estimates in the Bloomberg survey of 65 economists ranged from 89 to 95.

The current conditions index, which measures Americans' perception of their personal finances, declined to 105.1 from the prior month's 108.1.

The gauge of expectations six months from now increased to 85.7, the highest since June, from 82.7.

Americans expected the inflation rate in the next year will be 2.4 per cent, the lowest since September 2010, compared with 2.6 per cent in the December survey. Over the next five to 10 years, they project a 2.7 per cent rate of price growth, after 2.6 per cent in the prior month.

The labour market has provided a boost to Americans' moods and in 2015 showed the second-best year of monthly job gains since 1999, with a 221,000 average. Employment jumped by 292,000 in December, exceeding the highest estimate in a Bloomberg survey of 92 economists. The jobless rate held at 5 per cent, the lowest since April 2008.

Americans are also getting relief at the gas pump. The average cost of a gallon of regular unleaded gasoline fell to $1.94 on Jan. 13, the cheapest in almost seven years, according to motoring group AAA.

A bigger boost to paychecks has been harder to come by. Hourly earnings in December were $25.24 on average, down one cent from the prior month. They rose 2.5 per cent from a year earlier, less than the 2.7 per cent gain projected in the Bloomberg survey.

BLOOMBERG