TLDR: American consumer confidence reached an 11-year high in January as a strengthening labor market and plunging gas prices kept households looking on the bright side.
Apart from the GDP and ECI data, a few other important reports on the economy were released this week. First, the U.S. Department of Labor stated that the number of Americans making first-time claims for unemployment benefits plunged to 265K last week, the largest week-over-week decline since 2005 and the lowest initial jobless claims reading since 2000. However, that was a holiday-shortened week so the data may see a sharp revision in subsequent releases. Next, the pending home sales index from the National Association of Realtors (NAR) plunged by 3.7 percent in December to 100.7, much worse than expected and the 2nd-largest month-over-month decline since 2010. Elsewhere, business activity in the Midwest accelerated this month, as Market News International’s Chicago purchasing managers index (PMI) lifted to 59.4 in January, better than what economists had forecast. Finally, the consumer sentiment index from Reuters and the University of Michigan ended this month at 98.1, an 11-year high. Bloomberg continues, “The University of Michigan final consumer sentiment index rose to 98.1, the highest since January 2004, from 93.6 in December. Americans were the most upbeat about the economic outlook in a decade thanks to dollars saved at the gas pump and better employment prospects in a healing job market. Consumer spending in the fourth quarter climbed by the most since 2006 as persistently low energy prices made paychecks go farther in the absence of larger wage growth. “Consumer optimism did not waver in late January,” Richard Curtin, director of the Michigan Survey of Consumers, said in a statement. “The improvement has been due to more favorable trends in income and employment as well as the more recent declines in gas prices.” … The survey’s current conditions index, which captures Americans’ assessments of their personal finances, rose to 109.3 this month, the highest since January 2007, from 104.8. It was revised from 108.3 earlier this month. The measure of expectations six months from now increased to 91 from 86.4 in December, revised from a preliminary 91.6 reading. Americans expected an inflation rate of 2.5 percent in the next year, the lowest since September 2010 and down from 2.8 percent in December. Over a longer term of five to 10 years, consumers projected prices will rise 2.8 percent, the same as in the prior month…”
