Consumer Sentiment Held At Five-Year High In October

It doesn’t make much sense to most informed observers, but consumer sentiment held at a five-year high in the final October reading of the Thomson/Reuters University of Michigan’s Consumer Sentiment Index. The final reading was 82.6, down only slightly from the preliminary mid-month reading of 83.1. Both were the highest readings for the index since fall 2007.

Consumers are more positive about their own financial prospects, the trend of the general economy and job prospects. These attitudes contrast dramatically with those of many economists and business leaders, who are terrified about the potential impact of automatic tax increases and spending cuts scheduled to go into effect at the beginning of the year, unless Congress and the President act to avoid them.

“The very positive economic expectations of consumers stand in sharp contrast to growing concerns expressed by investors and companies about the pending fiscal cliff as well as the impact of the slowing global economy,” said UM Surveys of Consumers Chief Economist Richard Curtin. “This higher level of optimism is more vulnerable to reversal depending on how and when the fiscal cliff is bridged,” he warned.

The Conference Board will release its latest Consumer Confidence Index this week.

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