US consumer sentiment hits highest level since July as rate cuts boost optimism
- US consumer sentiment hit its highest level in four months as Americans took advantage of lower interest rates and trade-war tensions abated.
- The University of Michigan's consumer sentiment index reached 96.8 in November, falling into the upper half of the 94 to 97.5 expected range, according to Bloomberg data.
- The November growth was primarily driven by an optimistic economic outlook among Americans, and Surveys of Consumers chief economist Richard Curtin expects personal spending to be "energized" through December.
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US consumer sentiment reached its highest level in four months as Americans grew less worried about tariffs and the Federal Reserve's rate cuts took hold.
The University of Michigan's Index of Consumer Sentiment hit 96.8 in its final November reading, up from 95.5 in October. The metric fell just under its 97.5 level from November 2018.
Analysts surveyed expected the sentiment index to land between 94 and 97.5, according to Bloomberg. The November figure was the highest since July's 98.4 reading.
The November growth was primarily driven by an increasingly optimistic spending outlook among Americans. Recession fears have waned from their summer peaks, and the Fed's three rate cuts have encouraged greater borrowing among consumers. The upward momentum is likely to continue into December as spending picks up, Surveys of Consumers chief economist Richard Curtin said.
"Personal spending will be energized by record favorable evaluations by consumers of their personal financial situation, with gains expected across the entire income distribution, net increases in household wealth, the renewed appeal of price discounting, and reduced mortgage rates," Curtin said in a statement.
The economist highlighted a growing partisan gap in consumers' economic expectations, as well as a gap in optimism between consumers and business owners. Although trade talks and a surging stock market have improved the economic narrative in recent weeks, events like a Trump impeachment, tariff escalations, and the 2020 election still pose significant risks, Curtin said.
"One side anticipates a recession, while the other side expects an uninterrupted expansion in the year ahead," he noted, not naming where each side landed politically. "To be sure, there is ample reason for both optimism as well as pessimism, but not the extreme differences voiced by these groups."
The index's lowest point of the year arrived in August, hitting 89.3. The trough came as a key recession indicator flashed its first warning since the Great Recession and both sides of the US-China trade war ratcheted up tariff threats.
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