Reuter's/University of Michigan's Consumer Sentiment Continues To Rise

Boosted by the improving jobs market and low gas prices, consumer sentiment continues to rise, up 1.8 points to 86.4 for the mid-month October reading which is the new recovery high going back to July 2007. The gain is centered in the expectations component, up 3.0 points to 78.4 which is the best reading since October 2012. Gains in this component reflect optimism on job and income prospects. Lagging but still respectable is the current conditions component which is unchanged at a near recovery high of 98.9.

The effect of low gas prices is seen in 1-year inflation expectations which are down 2 tenths to plus 2.8 percent which is very low for this reading. This reading is certain to get the attention of the Federal Reserve doves who are concerned that inflation expectations may be drifting too low. The 5-year inflation outlook is unchanged and is also at plus 2.8 percent.

The Dow is moving to opening highs following today's report, one that takes the edge off Wednesday's soft retail sales data and underscores the effects of Thursday's dramatic decline in initial jobless claims.

Recent History Of This Indicator:
The Reuter's/University of Michigan's consumer sentiment index finished September at 84.6 versus 84.6 at mid-month and up from 82.5 from final August. The gain from August was centered in the expectations component which came in at 75.4 for final September, up 4.1 points from August which points to confidence in the outlooks for jobs and for income. The current conditions component, however, fell back slightly, down 0.9 points from August to 98.9 in a dip that does not point to strength for current consumer activity nor strength in the September jobs market. Inflation wasn't a factor behind the dip in current conditions as 1-year expectations fell 2 tenths from August to 3.0 percent with 5-year expectations down 1 tenth to 2.8 percent in declines that reflect the price contraction underway at the gas pump.