Preliminary data released by the University of Michigan on Friday showed a much bigger than expected improvement in U.S. consumer sentiment in the month of December.
The report said the consumer sentiment index climbed to 99.2 in December from the final November reading of 96.8. Economists had expected the index to inch up to 97.0.
With the much bigger than expected increase, the consumer sentiment index reached its highest level since hitting 100.0 in May.
The current economic index jumped to 115.2 in December from 111.6 in November, while the index of consumer expectations rose to 88.9 from 87.3.
Surveys of Consumers chief economist Richard Curtin said nearly all of the improvement in consumer sentiment in December was among upper income households, who reported near record gains in household wealth due to record high stock prices.
“Indeed, among households with incomes in the top third of the distribution, their overall assessment of their current finances was the third highest in the past twenty years,” Curtin said.
He added, “These gains were aided by declining inflation expectations, with long term inflation expectations returning to an all-time low.”
The report said one-year inflation expectations edged down to 2.4 percent in December from 2.5 percent in November, while five-year inflation expectations dipped to 2.3 percent from 2.5 percent.
Curtin said impeachment was barely mentioned in response to any question in early December but noted partisanship continues to have a strong impact on economic expectations.
The average gap between Democrats and Republicans was widened to 41.6 points since President Donald Trump took office compared to 18.7 points under former President Barack Obama’s administration.
Meanwhile, the views of Independents closely track the overall sentiment index, which Curtin said indicates the continuation of the economic expansion based on consumer spending.