(Bloomberg) — Consumer confidence improved in April to the second-highest level in more than eight years as Americans held more favorable views of the economic outlook and inflation.
The University of Michigan said Friday that its preliminary index of sentiment climbed to 95.9 this month from 93 in March. The median projection in a Bloomberg survey of economists called for an increase to 94.
Consumers were more upbeat about the economy, their current financial situations and the buying climate, indicating spending will pick up after a lackluster performance in the first quarter. At the same time, households have a dimmer view about their income prospects, meaning shoppers will keep seeking out discounts from merchants.
"We've seen signs that other economic activity has bounced since the weather's gotten better, so that should feed through to consumers' views on the outlook," Thomas Simons, a money market economist at Jefferies LLC in New York, said before the report. "Also, a big component is gasoline prices, which stopped going up and in some cases came down a little bit again. All of that is helpful."
Forecasts for the Michigan index in the Bloomberg survey of 68 economists ranged from 91.8 to 100. The index averaged 84.1 last year.
The sentiment survey's current conditions index, which measures Americans' assessment of their personal finances, rose to 108.2 this month, also the second-highest since January 2007, from 105. The measure of expectations six months from now increased to 88 from 85.3 in March.
Inflation expectations
Americans expected an inflation rate of 2.5 percent in the next year, matching the lowest level since September 2010 and down from 3 percent in March. Over the next five to 10 years, they expect a 2.6 percent rate of inflation, compared with 2.8 percent in the previous month.
"Consumers have judged their inflation-adjusted incomes more favorably in the past several months than any time since 2007," Richard Curtin, director of the Michigan Survey of Consumers, said in a statement. "Despite the recent gains, real income expectations are still at historically low levels. Given these income constraints, consumers have increasingly made their purchases contingent on what they consider attractively low prices."
A report Friday from the Labor Department showed inflation is starting to firm. The consumer-price index excluding food and fuel climbed 0.2 percent in March, reflecting broad-based gains in rents, medical care, clothing and used vehicles. Including the volatile costs of food and energy, the index also advanced 0.2 percent.
Gasoline prices
