U.S. consumer sentiment exceeded analyst estimates as low unemployment and growing incomes kept Americans in an upbeat mood, though the outlook soured amid concern that the labor market will soften.
The University of Michigan’s preliminary December sentiment index was unchanged from November at 97.5 and compares with the median estimate of 97 in a Bloomberg survey of economists, according to data released Dec. 7. The gauge of current conditions increased to 115.2 from 112.3 while the expectations index dipped two points to 86.1, the lowest in a year.
Even though the outlook weakened, confidence remains fairly solid, with support from strong hiring, improving wages and cheaper fuel costs. That bodes well for the holiday shopping season and for this quarter’s growth in consumer spending, the biggest part of the economy.
A measure of buying conditions for long-lasting goods rose six points to 167, the highest since March. Higher incomes have helped offset the absence of favorable discounting on homes and cars amid rising interest rates, according to the Michigan survey.
The balance of opinion turned negative for the first time in 18 months when consumers were asked about the unemployment rate in the year ahead. Labor Department data released Dec. 7 showed November jobs and wages rose by less than forecast, signaling some cooling in a still-healthy labor market. Consumers anticipate slower gains in prices, adding to signs that inflation is unlikely to flare up above the Federal Reserve’s goal.