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Consumer Sentiment Improves with Job Outlook

Signs of expanding employment lifted the ""Thomson Reuters/University of Michigan Index of Consumer Sentiment"":http://press.sca.isr.umich.edu/, according to a release issued Friday.


The index rose to 77.6 in February, a 5.1 percent increase over January and a 3.1 percent increase over February 2012. At the same time, the Current Conditions Index improved 4.7 percent month-over-month to an even 89.0, while the Index of Consumer Expectations rose 5.4 percent to 70.2.

When consumers were asked to describe in their own words what economic developments they had recently heard about, net job gains were reported more frequently last month than any time since May 2012, according to the Survey of Consumers. The improvement in job prospects reflects a slight uptick in prospects for the national economy.

""Consumer confidence continued to improve in February due to expected gains in employment. These expected job gains have partially offset spending concerns about higher payroll taxes and the impending reduction in federal spending,"" said Richard Curtin, chief economist for the Survey of Consumers. ""Unfortunately, those expected job gains will be harder to actually accomplish given that the economy faces weakened consumer demand due to lower take-home pay as well as reduced federal spending and employment.""

While sentiment is improved overall, consumers continue to express a ""persistent gloom"" over their personal finances. Less than a third of all households said they expect their finances to improve in the year ahead. Although inflation has remained low, about half of all households expect declines in their inflation-adjusted incomes during the year ahead.

Consumers also voiced dissatisfaction about the state of government economic policies, with nearly a quarter of respondents ""spontaneously mentioning some negative aspect."" Overall confidence in federal economic policies remained near its all-time low, with 15 percent of those surveyed saying they think the Obama administration and Congress are doing a good job.

""Consumers find the political blame-game for policy inaction a very unsatisfactory substitute for a compromise that could improve economic conditions in the near term as well as over the longer term,"" Curtin explained.

However, confidence in the housing market remains high, with homeowners reporting in February ""the most favorable expected annual trends in home values since late 2007."" Sales of interest-sensitive goods--such as homes and vehicles--are expected to continue rising in the year ahead, especially among upper-income households.