US consumer sentiment unexpectedly improved to the highest in six months, largely propelled by wealthier Americans who have benefited from stock-market gains.
The preliminary February sentiment index increased to 57.3 from 56.4 in January, according to the University of Michigan. The survey period includes responses from Jan. 20 to Feb. 2. The median estimate in a Bloomberg survey of economists called for a reading of 55.
The report also showed consumers grew more sanguine about the short-term inflation outlook. They expect prices to rise an annualized 3.5% over the next 12 months, the lowest in a year, data Friday showed. At the same time, longer-term inflation expectations crept higher.
While sentiment surged for those with stock holdings, confidence remained weak for those without, the report showed. The S&P 500 was near a record high during the survey period, helping drive consumers' perception of their current financial situation to a four-month high.
“These trends are consistent with the fact that asset values have soared, which benefits asset owners but not others,” Joanne Hsu, director of the survey, said in a statement.
However, concerns persist about the job market and the impact of inflation on personal finances. Respondents assessed the highest probability since July 2020 of losing their own job.
Data out this week showed a labor market struggling to gain traction. Employer vacancies dropped in December to the lowest level since 2020, private-sector payrolls rose an uninspiring 22,000 last month and companies announced the largest number of job cuts for any January since 2009, according to several government and private reports.
The current conditions gauge rose to a four-month high of 58.3, while the expectations index eased. Buying conditions for durable goods also improved to the highest since October, according to the report.
“Robust aggregate spending is consistent both with strength stemming from the disproportionate share of spending generated by wealthier consumers who are more confident, as well as the fact that less-confident, lower-wealth consumers may be exercising much more care over their spending,” Hsu said.
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