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January Consumer Sentiment Eclipses Forecast

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January 27, 2012 by   Leave a Comment

Confidence among U.S. consumers rose more than forecast in January to the highest level in almost a year, on signs of improvement in the job market.

Bloomberg reported that the Thomson Reuters/University of Michigan final index of consumer sentiment climbed to 75 from 69.9 at the end of December. The median estimate in a Bloomberg News survey called for 74, which matched the preliminary reading. The gauge averaged 89 in the five years leading up to the 18-month recession that ended in June 2009.

A strengthening labor market and higher stock prices may be boosting confidence, helping raise the odds that a pickup in household spending will continue into this quarter. At the same time, a sustained increase in gasoline prices and limited wage gains may restrain sentiment.

“Rising equity prices will be the primary catalyst for consumers’ better moods in the second half of January,” Aaron Smith, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, said before the report. “Retail gasoline prices and policy uncertainties will limit the increase in confidence.”

Estimates for sentiment in the Bloomberg survey of 63 economists ranged from 72.5 to 76. The index averaged 64.2 during the last recession.

The U.S. economy expanded less than forecast in the fourth quarter as consumers curbed spending and government agencies cut back, validating the Federal Reserve’s decision this week to keep interest rates low for a longer period.

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