Economic Future Suddenly Looks Brighter To Consumers

That’s how much a measure of Americans’ expectations for the future of their own finances and the broader economy improved in early April—a surprise to economists who were expecting less optimism among consumers.  

The University of Michigan’s Index of Consumer Expectations—a gauge of how confident people feel about future prospects for their own household budgets and those of the nation at large—rose 18% from March to early April, the university said Thursday.

With that jolt, the index erased the slump it took in February and March, but it remained at a relatively low level, largely because of worries about inflation. The index is part of a broader measure, the Index of Consumer Sentiment, which also popped, but not as much. It was up 10.6% and was largely fueled by the improved expectations for the future. (The broader index also measures feelings about the present.)

Consumer sentiment is closely watched by experts because it tends to predict how much people are willing to spend—a major factor in gauging the health of the economy.  Economists were surprised the outlook got better considering rapidly rising prices, ongoing problems with manufacturing and transporting goods, and the economic fallout from the Russian invasion of Ukraine.

Consumers’ feelings about the future of the broader economy, their own finances, and the job market all improved notably. One reason for the optimism: Gas prices, a major source of financial angst, have come down a bit after spiking in March. Consumers have noticed, Richard Curtin, chief economist at the University of Michigan Surveys of Consumers, said in a post accompanying the report.

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