Consumer Sentiment Unexpectedly Rises to Three-Month High

A driver returns a fuel nozzle to a gas pump at a Chevron gas station
A driver returns a fuel nozzle to a gas pump at a Chevron gas station in San Francisco. (David Paul Morris/Bloomberg News)

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U.S. consumer sentiment unexpectedly rose to a three-month high in early April as optimism about job growth and wage expectations more than outweighed decades-high inflation.

The University of Michigan’s sentiment index increased to 65.7 from 59.4 in March, data released April 14 showed. The figure exceeded all estimates in a Bloomberg survey of economists, which had a median forecast of 59.

The survey’s measure of future expectations climbed to 64.1, the highest since January. The monthly increase of almost 10 points was the largest since 2006. A gauge of current conditions increased to 68.1.

Consumers still expect inflation to rise 5.4% over the next year, and their expectations for price increases in the next five to 10 years remained at 3%. That’s a good sign that they don’t see inflation worsening much more.

Americans see their wages rising and the economy improving, bolstering sentiment about their personal finances. They also see a smaller rise in gas prices, supporting anticipation of improved inflation-adjusted incomes.

Healthy employment gains helped bolster wage expectations among respondents younger than age 45. Households expect income gains to rise 2.7%, the biggest increase since 2006.

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Even so, inflation is still outpacing wage gains and straining Americans’ budgets, especially as prices for everyday items like food and gas are higher after Russia’s war in Ukraine. While pump prices have come down somewhat, grocery bills are likely to remain expensive for some time to come, leaving little disposable income for other purchases.

Data this week showed U.S. consumer prices rose in March by 8.5%, the most since late 1981, while producer prices in that month rose the most in records back to 2010. A report earlier April 14 showed retail sales rose 0.5% in March, led by an increase in gasoline receipts.

The Michigan data may help to soothe concerns about the prospects of a recession, which some economists fear will be the result of an aggressive Federal Reserve combined with the impact of higher inflation on spending.

— With assistance from Chris Middleton.