Consumer confidence rebounded sharply this month, nearing a post-Great Recession high, as Americans grew more positive about their financial situation and outlook for the economy, according to a leading private barometer released Friday.
The monthly consumer sentiment index from the University of Michigan and Thomson Reuters, which is watched closely by economists and investors, rose to 84.1 from 80 the previous month.
The jump surprised economists, who had expected a smaller increase to 82.5. The April reading was close to the 85.1 level reached in July, which was the highest since 2007.
Lindsey Piegza, chief economist at Sterne Agee, said confidence has rebounded more than economic growth.
“Perhaps consumers are no longer using pre-recessionary times as a comparison, but rather a new, lowered bar of expectations, accepting a new normal,” she said.
But Piegza also noted that “rising equity and home prices, coupled with the return of warmer spring weather, has boosted consumers’ spirits and expectations of further economic improvement.”
Richard Curtin, the survey’s chief economist, warned that consumers’ long-term expectations for the economy had not improved much since last year and were the key to avoiding sharp fluctuations in confidence.
Consumers open their wallets more when they are optimistic, and their spending accounts for about two-thirds of economic growth.
“Resilience among consumers is dependent on positive long-term economic expectations,” he said. “Hopefully, as the pace of economic growth springs ahead in the coming months, the main beneficiary will be an improvement in long-term economic expectations for personal finances as well as the overall economy.”
The percentage of consumers who said their finances had worsened dropped to 28 percent in April from 37 percent the previous month, and was at the lowest level since April 2007. But that didn’t translate into optimism for their finances in the coming year, which remained about the same as in March.
Consumers were more optimistic about the outlook for the national economy and future job growth, the survey found.