A customer browses gift wrapping supplies displayed for sale at a Dollar Tree Inc. store in Louisville, Kentucky, U.S. (Photographer: Luke Sharrett/Bloomberg)

U.S. Consumer Sentiment Rises to Six-Month High, Above Estimate

(Bloomberg) -- U.S. consumer sentiment jumped more than forecast in September to a six-month high as Americans grew more optimistic about the economy and their purchasing plans, according to a University of Michigan report Friday.

Highlights of Michigan Sentiment (Sept., Preliminary)

  • Sentiment index rose to 100.8 (est. 96.6) from prior month’s 96.2; result is higher than most optimistic estimate in Bloomberg survey
  • Current conditions gauge increased to 116.1 from 110.3
  • Expectations measure climbed to 91.1, a 14-year high, from 87.1 

Key Takeaways

The optimism reflected recent financial gains, which were cited by 56 percent of households, just below the record of 57 percent reached in March this year and February 1998, the report said.

A measure of buying conditions for long-lasting goods rose to a three-month high, after a decline in August. Consumers’ views of buying conditions for houses, vehicles and household items “grew slightly more optimistic,” according to the report. That’s a good sign for growth in consumer spending, the biggest part of the economy, and in sync with retail sales results for August released on Friday.

Consumers also said they benefited from income and wealth increases, supported by higher stock prices and property values.

While a strong job market is a positive, the U.S. is facing headwinds from trade disputes.

“Concerns about the negative impact of tariffs on the domestic economy were spontaneously mentioned by nearly one-third of all consumers in the past three months, up from one-in-five in the prior four months,” according to the report.

Other hurdles for households include rising prices and higher borrowing costs, as markets widely project another interest-rate hike by the Federal Reserve this month.

The report also showed consumers anticipate slower gains in prices. Inflation expectations for the year ahead fell to 2.8 percent from 3 percent in prior month, while the inflation rate over the next five to 10 years was seen at 2.4 percent compared with 2.6 percent in the August survey.

Official’s Views

“Personal finances remained very strong due to gains in income and household wealth,” Richard Curtin, director of the University of Michigan consumer survey, said in a statement. However, “the largest problem cited on the economic horizon involved the anticipated negative impact from tariffs.”