WASHINGTON (12/1/14)--The University of Michigan Consumer Sentiment index climbed to its highest level since July 2007, the university reported last week, rising 1.9 points to 88.8 in November (Economy.com Nov. 26).
The current economic conditions subindex climbed 4.4 points to 102.7, also the highest reading since July 2007, and the economic outlook index inched up 0.3 points to 79.9.
"The rise is mainly because of improved personal finances," said Nate Kelly, Moody's analyst (Economy.com). "Consumers are likely relishing the extra expendable income afforded them by gas prices that are at their lowest in four years."
Shoppers project a price increase of 2.8% over the next 12 months, slightly below October's projection of a 2.9% increase.
Shoppers also forecast that inflation will average 2.6% over the next five years, down from 2.8% and the lowest estimate since 2009.
"Combined with tame inflation and a rebound in stock prices, consumers are likely to continue feeling good about their finances," Kelley said. "Businesses are hiring more aggressively, and anecdotal evidence suggests workers are seeing pay rise more than earlier in the recovery. This will set the stage for a rise in confidence and spending heading into 2015."