Consumer Confidence Up After Shutdown Ends

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Consumer confidence rebounded among households with incomes less than $75,000, says the recent Thomson Reuters/University of Michigan Surveys of Consumers.

Overall, the survey’s sentiment index clocked in at 82.5 in December, showing a 9.6 increase over December 2012. The year-to-year gain was nearly equal for current economic assessments and future economic prospects. The expectations and current conditions indexes also showed year-over-year gains at 13 percent and 13.3 percent, respectively.

“Consumers were clearly relieved when the (Washington) D.C. gridlock ended,” says Richard Curtin, U-M economist and director of the surveys. “Confidence has bounced back to nearly the same levels it was before the crisis in mid-2013.”

However, Curtin says consumers do not see ending a shutdown or passing a new budget to keep the government open as a proactive step toward better economic policy.

“While they anticipate the economy to improve and retailers to offer larger discounts, most consumers still anticipate tiny wage gains — gains that are even smaller than the currently low inflation rate,” Curtain says. “Consumers are not ready to celebrate, aside from those who have benefitted from rising stock market wealth.”

The survey also showed consumers anticipated the unemployment rate would fall in the year ahead.

Higher-income households reported about the same size gains in the November survey.

The survey also showed personal finances slightly improved in December, although largely due to rising values of homes and stock holdings among those in the top third of the income distribution.

While personal finances improved among all households, most of the gains occurred among those under age 45 and those in the top third of the income distribution. The largest differences were due to rising stock values, primarily held by top income households.

When asked to identify recent trends, consumers reported more news of job gains and anticipated that the national unemployment rate would decline in the year ahead. The expected declines were due to a strengthening economy in the year ahead, although over the longer term the economy was still seen as vulnerable to setbacks.

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