- The University of Michigan sentiment index rose to 86.5 from 84.9 in March – a new pandemic high.
- Another measure of current economic conditions also hit a one-year high in the Friday release.
- Optimism around stimulus, vaccination, and projected economic growth drove most of the gains.
- See more stories on Insider’s business page.
Everything’s coming up roses for Americans. As more vaccine shots go into arms, consumer optimism is the strongest it’s been in a year – they also have stimulus and low interest rates to thank.
The University of Michigan’s consumer sentiment index rose to 86.5 in a preliminary April reading, from 84.9. That level signifies a new pandemic-era high and marks a second straight jump after the headline gauge dipped in February.
Economists surveyed by Bloomberg anticipated a stronger gain to 89.
The university’s measure of current economic conditions also leaped to its highest point since March 2020, climbing to 97.2 from 93. A gauge of expected conditions held at its one-year high of 79.7. Estimates for next-year inflation rose to 3.7% from 3.1%, and those for inflation over the next five years dipped 0.1 points to 2.7%.
Half of surveyed consumers anticipated a decline in unemployment, according to the Friday press release. That’s the highest level recorded by the university.
The improvements were mainly driven by expectations for strong economic growth and optimism around stimulus and the accelerating rate of vaccination, Richard Curtin, chief economist at the university’s Surveys of Consumers, said. Vaccine distribution and checks included in Democrats’ $1.9 trillion stimulus package propped up economic activity over the last several weeks. At the same time, warmer weather led state and local governments to relax some business restrictions.
Lingering concerns around vaccine safety and higher near-term inflation offset some enthusiasm, but the trend still points to Americans expecting a strong recovery as the US reopens.
“This is opposite of the usual pattern over the past 50 years, when recoveries were paced by larger and earlier gains in expectations,” Curtin said. “The strength in current economic conditions reflects much larger than usual stimulus payments during the past year, and much larger than usual economic gains due to comparisons with last year’s shutdowns.”
The uptick in consumer sentiment caps a week of encouraging data releases. Jobless claims tumbled to a pandemic-era low of 576,000 last week, handily besting the median estimate of 700,000 claims. Separately, retail spending rocketed 9.8% to a record high in March as Americans deployed stimulus and took advantage of warmer weather.
The University of Michigan’s data suggests that spending will hold strong in the months ahead. The data supports an “ongoing surge in consumer spending” as Americans grow even more confident in the economic rebound, Curtin said. Still, the drawdown in bolstered savings will likely be cautious given lasting uncertainties around virus strains and inflation, he added.