Consumer confidence strengthens: Decline in gas prices sparks positive expectations

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Published on Oct 04, 2006
ANN ARBOR, Mich.—Consumer confidence rose in the September 2006 survey due to declines in gas prices. Consumers judged the year-ahead prospects for the national economy much more favorably, as expectations for inflation, unemployment and interest rates all improved in the latest survey. "Consumers held a much more positive outlook for the overall economy as well as prospect for their own financial situation, despite more negative evaluations of their current financial situation," according to Richard Curtin, the Director of the University of Michigan's Survey of Consumers.

The difference was quite sharp, as the Expectations Index posted its sixth largest monthly gain, and the Current Conditions Index posted its twelfth largest monthly loss. "Consumers have had a difficult time managing their finances due to higher interest rates, slower growth in employment, and until recently, higher gas prices," Curtin explained. When they look ahead, consumers anticipate a somewhat lower inflation rate due to declines in gas prices and somewhat larger gains in their inflation adjusted incomes.

The latest data on consumer confidence is consistent with a growth rate in real consumption expenditures that averages about 2