Consumer Sentiment Soars (Again!)

Consumer sentiment is absolutely soaring so far this month, up nearly 7 points to 95.8 for the mid-month flash. This is the best reading since June last year. Expectations, which have been pulling down the headline index most of this year, jumped nearly 10 points to 87.5. The month-to-month turnaround for this reading is the best of the cycle, since 2006. Current conditions are also moving higher, to 108.6 from 106.7.

Readings on inflation expectations are mixed with the 1-year outlook, despite the rise underway in gas prices, falling a very steep 3 tenths to 2.5 percent, offset in part by a 1 tenth uptick to 2.6 percent for the 5-year outlook.

Federal Reserve policy makers will not be pleased with the 3 tenth decline in near-term inflation expectations, one however that looks suspiciously like an outlier and will have to be repeated in subsequent reports. Otherwise this report is very strong and, driven by the fundamental strength of the labor market, points to renewed confidence in the economic outlook.

Recent History Of This Indicator:
Hurt by questions over future job and income prospects, the consumer sentiment index has been steadily moving lower this year but still has held at respectable levels. Forecasters see the preliminary May reading coming in at 89.7 for a 7 tenths gain from final May. Inflation expectations, which are closely followed in this report, fell back sizably in April despite the rise underway in gasoline prices.