Consumer sentiment saw a lift this month, according to the Reuters/Michigan Consumer Sentiment Index, which gained 4 points for the month to reach a reading of 74.0. The gain was more than analysts had anticipated and puts the index 20 points higher than it stood during last August’s trough, when the Eurozone debt crisis and debt-ceiling debate shook consumers’ confidence.
Improvements were posted for both the Current Conditions Index (which was up three points to a reading of 82.6) and the Expectations Index (which was up 5.8 points to a reading of 68.4).
Despite the lift, the index remains below normal levels, which typically range in the 90s.
"Respondents had more favorable views of their personal finances as well as the outlook for the recovery," wrote Paul Edelstein, director of financial economics at IHS Global Insight, in a press statement regarding the numbers. "Jobs were also reported to be easier to come by. As such, more respondents reported favorable buying plans for household durables and vehicles."
But while the index’s upward movement is welcome news, Edelstein says it can’t necessarily be counted on to boost sales numbers. "Consumer sentiment and spending growth typically move together over the business cycle. However, they became somewhat detached last year, particularly during the third quarter, when sentiment tanked but spending growth rebounded (albeit weakly and from a very low level)," he wrote. "It is possible that this time, sentiment could jump ahead of spending."
Claire Easley is a senior editor at Builder.
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