Consumer sentiment surges to 13-year high
Washington — Consumer sentiment unexpectedly surged to a 13-year high as Americans’ perceptions of the economy and their own finances rebounded following several major hurricanes, a University of Michigan survey showed Friday.
The jump in sentiment, which was greater than any analyst had projected, may reflect several trends: falling gasoline prices following a hurricane-related spike; repeated record highs for the stock market; a 16-year low in unemployment; and post-storm recovery efforts driving a rebound in economic growth.
The advance in the main gauge spanned age and income subgroups as well as partisan views, according to the report. Almost 6 out of every 10 consumers thought the economy had recently improved in early October, the university said.
Not all measures in the survey showed big gains: the share of consumers reporting improved finances held steady at about half, while the proportion expecting gains in their financial situation fell slightly to 40 percent.
“While the early October surge indicates greater optimism about the future course of the economy, it also reflects an unmistakable sense among consumers that economic prospects are now about as good as could be expected,” Richard Curtin, director of the University of Michigan consumer survey, said in a statement. “Indeed, nothing in the latest survey indicates that consumers anticipate an economic downturn anytime soon — which contrarians may consider a clear warning sign of trouble ahead.”
The report came the same day that the Commerce department said Americans increased their spending at retailers last month by the most in two and a half years, driven by strong auto sales as residents of hurricane-ravaged areas replaced destroyed cars.
Retail sales rose 1.6 percent in September, after slipping 0.1 percent in August.
Auto sales jumped 3.6 percent, the most since March 2015. Gas sales climbed 5.8 percent, the most in four and a half years, reflecting price spikes after Hurricanes Harvey and Irma. The storms damaged oil refineries and pushed up gas prices 13 percent last month.
Even excluding the volatile auto and gas categories, sales rose a solid 0.5 percent, up from a 0.1 percent gain in August.
Neil Saunders, managing director of Global DataRetail, said that many analysts worried higher gas prices would lead Americans to spend less elsewhere.
“This did not materialize, and consumers used modest gains in wages ... to carry on buying,” Saunders said.
Most of the gains last month were likely fueled by Hurricanes Harvey and Irma, which slammed into Texas, Florida and other southeastern states in late August and September.
Sales at home and garden supply stores rose 2.1 percent, probably lifted by hurricane preparation, as well as repairs and renovations in the aftermath of the storms. Grocery store sales increased 0.8 percent, the most since April 2016, likely boosted by restocking after the hurricanes hit.
Sales at general merchandise stores, which include big box retailers such as Walmart and Target, rose 0.3 percent.
Online retailers reported another healthy gain of 0.5 percent. E-commerce sales have jumped 9.2 percent in the past year, more than double the overall sales increase of 4.4 percent.
Not all stores saw a boost: Sales at furnishers, electronics and appliance stores, and sporting goods stores fell.
The retail sales report is closely watched because it provides an early read on consumer activity each month. Consumer spending accounts for about 70 percent of the economy.
U.S. economic growth likely slowed in the July-September quarter as the hurricanes shut down thousands of businesses, people were forced to miss work, and power was cut to millions of homes. Analysts forecast that the economy expanded at a 2 percent annual pace in the third quarter, down from a 3 percent gain in the April-June quarter.
Yet the economy is expected to rebound in the final three months of the year as rebuilding and repair work accelerates. Construction and engineering firms are expected to step up hiring as homes, commercial buildings and roads and bridges are fixed. Economists expect growth will pick up to a 2.5 percent to 3 percent pace.
Bloomberg News and the Associated Press contributed.
Copyright 2017 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.