news.cuna.org/articles/Consumer_confidence_soars_to_highest_level_since_2004

Consumer confidence soars to highest level since 2004

January 30, 2015

WASHINGTON (2/2/15)--Consumer confidence improved markedly in January, as the University of Michigan's consumer sentiment index jumped 4.5 points for the month to an 11-year high of 98.1, according to the final reading for the month (Economy.com Jan. 30).

The final reading resulted in a 0.1 downward revision, but both the current conditions and expectations subcomponents of the index surged in January.

This may indicate "that a strengthening labor market and lower gas prices are allowing buyers to look on the bright side," said Nate Kelley, Moody's analyst (Economy.com). "Lower gas prices also helped to lower near-term inflation expectations."

The current conditions subindex surged by 4.5 points for the month to 109.3 from 104.8 in December, the highest number seen January 2007.

Moody's attributed improving household incomes as a key driver of the current conditions metric, as roughly 40% of households cited higher income year-over-year, up from 34% in December.

Roughly 70% of respondents said business conditions have improved in recent months, compared with 61% in December, and 68% said conditions are better than they were a year ago.

Further, the expectations subcomponent increased 4.6 points to 91, its highest reading since July 2004.

About 32% said they believe household finances will improve over the coming year, relatively unchanged from the prior month, while 10% fewer respondents said they believe their finances will worsen over the next year.

Those who believe their finances will improve climbed 3% in January.

"Buyers noted stronger current finances and more optimism for the year ahead," Kelley said. "In particular, consumers indicated they are bringing home larger paychecks, a long overdue development in the consumer recovery as the labor market unwound slack built up during the recession."