The economy has been improving for some time, albeit slowly. There has likewise been a slow but steady uptick in consumers’ positive feelings about both the broad recovery and their personal standings.
This month, Americans feel that their personal financial situations are in the best shape they’ve seen in the last five years, according to the latest Survey of Consumers conducted by Thomson Reuters and the Univeristy of Michigan. Housholds are now reporting increases in their personal income and half of those surveyed said they expect to see more increases in the coming year. It’s the first time in four years consumers felt that way about their chances for future wage increases. However, it should be noted that those expected increases were still less than 1 percent, and that when inflation is factored in, there is technically no change in predicted income.
Nonetheless, many also feel better due to the expectation that employment will tick upwards in the near future, the report said. The October survey found that consumers have the most favorable outlook on unemployment since 1984, with less than 20 percent of those surveyed saying they believe that unemployment will increase in the next year.
“While the surge in confidence will act to bolster consumer spending during the upcoming holiday season, it also means that this higher level of optimism is more vulnerable to reversal depending on how and when the fiscal cliff is bridged,” said Richard Curtin, the chief economist for the Survey of Consumers. “The surge in consumer optimism may be largely due to the implied election promises of both candidates that most of the Bush tax cuts and the payroll tax cuts will be promptly extended.”
In all, the Index of Consumer Sentiment ticked considerably upward, rising to a mark of 82.6 from Setepmber’s 78.3 percent, an increase of 5.5 percent month-over-month, the report said. On an annual basis, though, it was a 35.9 percent spike from the 60.8 mark seen in the same month last year.
Experts say that consumer feeling about their financial positions is a massive driver of spending, which in turn benefits the entire economy. A vast majority of the entire gross domestic product is made up of consumer outlays, and therefore the more Americans spend, the better for everyone.
Image: Bright Meadow, via Flickr