Consumer Confidence Ticks Up Mid-February Though Consumers Appear Conflicted

The mid-month reading on consumer sentiment from Thomson Reuters/University of Michigan Surveys of Consumers surprised some observers by popping up to 76.3 from the final January reading of 73.8. Economists polled by Reuters had expected the index to rise only slightly. The current conditions and expectations measures also rose.

Surprisingly, households with incomes below $75,000 were among the most optimistic, “with expected gains in employment more than offsetting declines in after-tax incomes due to the end of the payroll tax cut,” Surveys Chief Economist Richard Curtin said.

Many economists expected the payroll tax increase and rising gasoline prices to temper confidence. The Census Bureau’s advance report on retail and foodservice sales Feb. 13 had overall retail sales up only 0.1% in January after a half point increase in December. Foodservice sales were flat.

And it’s not that consumers expect their incomes to increase in any measurable way. Curtin also noted that expectations for inflation-adjusted incomes remain quite negative because “even the current low rate of inflation (consumer prices rose only 1.7% in 2012) is dramatically higher than the zero growth rate expected for household income.”

Still the positive jobs reports appear to be buoying confidence that the U.S. economy is gradually improving. We’ll have to see later in the month and as the year progresses whether that confidence withstands the early run-up in gas prices and the sequester battle in Washington, D.C.