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Consumer Sentiment Beats Expectations

Consumers in the latest Thomson Reuters/University of Michigan survey reported their most improved financial situation in more than five years, according to ""Surveys of Consumers"":http://www.sca.isr.umich.edu/.

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The group's Consumer Sentiment Index rose to 84.5 in the final May survey, its highest level since July 2007 and an improvement over the ""preliminary reading"":https://themreport.com/articles/consumer-confidence-hits-6-year-record-2013-05-20 of 83.7 reported mid-month. April's index reading was 76.4; May 2012's reading was 79.3.

More consumers reported in May that their finances had improved rather than worsened--the first time that's happened in five years, according to Surveys of Consumers. In addition, the overall mix of economic news cited by consumers was the most positive it's been in the last decade, leading households to adopt the most improved outlook for the national economy since 2007.

The most common news item consumers mentioned hearing about was rising employment, which was cited by one-third of respondents.

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""The surge in consumer confidence is exactly the type of economic jump-start the Federal Reserve intended to result from its aggressive policies,"" said Richard Curtin, chief economist for Surveys of Consumers. ""To be sure, consumers still expressed concerns with their financial prospects, especially about income gains over the longer term. It will take actual and repeated income increases rather than simply a renewed optimistic outlook for consumers to permanently revise their income expectations upward.""

The gain in confidence was largest among upper-income households (those with incomes above $80,000), although all income groups posted increases. One-quarter of high-income consumers spontaneously mentioned increases in their household wealth, including increases in the value of their homes and stock holdings as well as reductions in their debts.

Assessments among homeowners of the current value of their homes were the most favorable since 2007, Surveys of Consumers reported. Though the expected annual increase in home values did not change among all homeowners, upper-income households posted the highest annual expected increase since 2007.

On the other hand, the recent run-up in home prices may have encouraged homeowners to wait for additional gains before selling--sour news for an already strained market.

Both index components increased in May. The survey's Expectations Index rose to 75.8 in the latest survey, up from 67.8 in April and 74.3 in May 2012. The Current Economic Conditions Index was 98.0, up slightly from April (89.9) and May 2012 (87.2), reaching its highest level since August 2007.

The survey comes only days after the Conference Board's ""latest index"":https://themreport.com/articles/consumer-confidence-trends-higher-in-may-2013-05-28, which showed consumer confidence climbing to a five-year high in May.

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