years of doubts, Americans turn more bullish on economy
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[December 13, 2014]
By Jason Lange
WASHINGTON (Reuters) - Pessimism and doubt
have dominated how Americans see the economy for many years. Now, in a
hopeful sign for the economic outlook, confidence is suddenly perking
Expectations for a better job market helped power the Thomson
Reuters/University of Michigan index of consumer sentiment to a near
eight-year high in December, according to data released on Friday.
U.S. consumers also saw sharp drops in gasoline prices as a shot in
the arm, and the survey added heft to strong November retail sales
data that has showed Americans getting into the holiday shopping
season with gusto.
"Surging expectations signal very strong consumption over the next
few months," said Ian Shepherdson, an economist at Pantheon
While improvements in sentiment haven't always translated into
similar spending growth, consumers at the very least are feeling the
warmth of several months of robust hiring, including 321,000 new
jobs created in November.
When asked in the survey about recent economic developments, more
consumers volunteered good news than bad news than in any month
since 1984, said the poll's director, Richard Curtin.
Moreover, half of all consumers expected the economy to avoid a
recession over the next five years, the most favorable reading in a
decade, Curtin said.
The data bolsters the view that the U.S. economy is turning a corner
and that worker wages could begin to rise more quickly, laying the
groundwork for the Federal Reserve to begin hiking its benchmark
interest rate to keep inflation from eventually rising above the
Fed's 2 percent target.
Overall, the sentiment index rose to a higher-than-expected 93.8,
mirroring levels seen in boom years like 1996 and 2004.
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Many investors see the Fed raising rates in mid-2015, and
policymakers will likely debate at a meeting next week whether to
keep a pledge that borrowing costs will stay at rock bottom for a
Consumers see faster inflation ahead. Over the next year, they
expect a 2.9 percent increase in prices, up from 2.8 percent in
November, according to the sentiment survey.
Their expectations run quite counter to recent price data. The Labor
Department said separately its producer price index dropped 0.2
percent last month, brought lower by falling gasoline prices. Prices
were soft even excluding the drag from gasoline.
U.S. stocks briefly cut losses after the buoyant sentiment data but
stayed lower on the day as investors fretted about declining oil
prices and what that said about global demand.
(Reporting by Jason Lange in Washington; Additional reporting by
Rodrigo Campos in New York; Editing by Andrea Ricci)
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