The scary stuff is out there — shaky days a few weeks ago on Wall Street, Ebola, sticker shock in the dairy aisle, you name it. But consumers posted their most optimistic outlook since before the start of the Great Recession.
Consumer confidence rose in October for the third consecutive month, hitting its highest level since July 2007, according to the Thomson Reuters/University of Michigan Survey of Consumers.
Wall Street got back on track, as well. On Friday, the Dow Jones Industrial Average rose 195.10 points to 17,390.52.
Mark Zandi, chief economist with Moody’s Analytics, said consumers are “slowly getting their mojo back.”
Zandi noted that more jobs, lower unemployment, plunging gasoline prices and record-high stock prices are lifting spirits.
The index of consumer sentiment rose to 86.9 in October from 84.6 in September. To be sure, some note the index regularly topped 90 before the last economic downturn.
The survey has been conducted by the University of Michigan Institute for Social Research in Ann Arbor since 1946. The survey monitors consumer attitudes and expectations.
Richard Curtin, director of the survey, said in a statement that consumers are not overreacting to such negative news as a global economic slowdown or Ebola.
Consumers felt more weight in their wallets, too. The survey noted that consumers reported the most favorable personal financial expectations, as well as the most positive year-ahead outlook for the national economy, in the past seven years.
“Consumers have kept their focus on improved job and wage prospects,” Curtin said. “Finally, five years after the start of the recovery, consumers have begun to adopt the expectations and behaviors that have driven past expansions.”
Another good sign: Nearly six in ten consumers reported that the economy had recently improved, the most positive rating in more than 10 years.
When asked about the economic outlook for the year ahead, 45 percent of those surveyed expected good times financially in the future. That’s up significantly from just 28 percent a year earlier.
Robert Dye, chief economist for Comerica Bank, said job growth has been a fundamental driver for boosting consumer confidence.
Finding gas prices at the pump to be around $3 or less a gallon also gives consumers more money to spend on something other than filling the gas tank each week.
“A recovery in U.S. stock prices, after the slide into mid-October, will help going forward,” Dye said.
The survey noted that the expectation is that gains in year-end spending could be the best in several years, benefiting from higher confidence as well as falling gas prices at the pump.
Consumers anticipated that the continued strength in the economy would lead to a lower national jobless rate, too.
To be sure, consumer sentiment can be fickle. But Zandi says that barring an unforeseen event, consumers could feel even better in 2015 and perhaps spend with even more gusto a year from now.