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Consumer Confidence Reaches Post-Recession High on Income Growth Expectations

bear-and-bull-marketConsumer confidence reached its highest level since the Great Recession in September, according to the Thomson Reuters and University of Michigan Surveys of Consumers. The index rose 2.5 percent over the month to 77.5. However, "confidence has repeatedly failed to move above this level," according to the survey.

September's increase in confidence is the result of optimistic outlooks on the overall economy and personal incomes. In fact, of the two components that make up the overall consumer sentiment index—consumer expectations and current conditions—a rise in the former is solely responsible for the positive movement in September.

The consumer expectations index rose 5.8 percent over the month of September, while the current conditions index fell 0.9 percent.

September's optimism is a little past due, according to the survey's chief economist, Richard Curtin.

"The defining aspect of the current recovery has been that optimism about future prospects has not improved in advance of actual economic gains," Curtin said.

"Surprisingly, an improved economy has not sparked renewed optimism, at least until recently," he continued.

Consumers expressed expectations of "modest" job growth over the next year, but they do not expect much change in the unemployment rate, according to the survey.

Additionally, a growing number of consumers expect their incomes to increase over the next year, albeit modestly. The median income growth expectation reported in September was 1.1 percent, which is the highest expectation since late 2008. At the same time, more households anticipate income growth now than at any time since September 2008.

"The renewal of income growth is particularly important for sparking increased consumer spending in the year ahead," Curtin said, adding that likely pending changes to monetary policy make income gains all the more necessary to elevate consumer spending.

About Author: Krista Franks Brock

Krista Franks Brock is a professional writer and editor who has covered the mortgage banking and default servicing sectors since 2011. Previously, she served as managing editor of DS News and Southern Distinction, a regional lifestyle publication. Her work has appeared in a variety of print and online publications, including Consumers Digest, Dallas Style and Design, DS News and DSNews.com, MReport and theMReport.com. She holds degrees in journalism and art from the University of Georgia.

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