On Friday, the University of Michigan said that the consumer sentiment index rose to a reading of 94.7 in May, up 5.7 points from April’s reading of 89. That marked the biggest jump in a single month since 2013 and the highest the index has been since last June’s 96.1 points.
Although Friday’s figure is below a preliminary estimate of 95.8 that the University of Michigan released earlier this month, the report showed a measure of consumers’ sentiment of current economic conditions rose to 109.9 in May from 106.7 in April. A measure of consumer expectations about conditions in the coming months rose sharply to 84.9 from 77.6, suggesting that confidence has risen sharply, boosting hopes the economy will rebound this spring from a sluggish winter.
Consumer spending reflects more than two-thirds of economic demand in America. Right now, Americans are more confident than at any time in almost a year, as cheap gasoline, low interest rates and a rebound in stocks boost the economy’s prospects. Based on that, economists believe that consumers, feeling confident at this time, are more likely to spend on everything from cars to restaurant meals, helping businesses, and the economy, grow.
The Commerce Department said on this Friday that Gross domestic product, the broadest measure of goods and services produced across the U.S., expanded at a 0.8% annual rate in the first three months of the year, and recent data, including Friday’s sentiment index, show the economy is poised to return to solid, though not robust, growth in the second quarter.
“Despite the meager GDP growth as well as a higher inflation rate, consumers became more optimistic about their financial prospects and anticipated a somewhat lower inflation rate in the years ahead,” Richard Curtin, the chief economist for the University of Michigan’s Surveys of Consumers, said in a statement, “Positive views toward vehicle and home sales also posted gains in May largely due to low interest rates.”