Consumer sentiment best in 3 years

Rex Nutting, MarketWatch

Last Update: 10:18 AM ET Jan 19, 2007


WASHINGTON (MarketWatch) -- U.S. consumers' attitudes about the economy brightened in January, with a key gauge of consumer sentiment rising to its highest level in three years.

The University of Michigan consumer sentiment index jumped to 98.0 in January from 91.7 in December, according to Reuters, which has an arrangement to publish the index. It's the highest since January 2004 and was well above the 92.0 expected by economists surveyed by MarketWatch.

Consumers were more upbeat about the present and future economy. The current conditions index rose from 108.1 to 112.5, the highest since July 2005, just before oil prices spiked higher.
The expectations index rose from 81.2 to 88.7, the highest since December 2004.
The only negative note in the report came from a slight increase in consumers' inflation expectation over the next 12 months to 3% from 2.9%. The five-year inflation expectation remained at 3%.
Economists caution that the consumer sentiment index does not necessarily predict consumer behavior. However, the expectations index is one of 10 indicators that make up the index of leading economic indicators.