The recent Thomas Reuters/University of Michigan “Surveys of Confidence” shows that for the first time in five years, Americans are feeling more confident about the economy. And, for the first time since 2007, more Americans feel better about their personal finances according to that survey and a new Gallup poll. Is this the October surprise?
The report concluded that consumers were more optimistic about prospects for their own personal finances than they have been previously. It also found consumers anticipated the national economy to continue improving, and they expected the unemployment rate to continue to decline significantly over the next year.
Overall, consumers were more confident about economic prospects in October than any other time during the past five years.
Personal Finances Best in Five Years
The Reuters/UM survey said that consumers judged their current financial situation more favorably in October than anytime in the past five years. More households reported recent income gains, and for the first time in four years and half of all households expected their annual incomes to increase during the year ahead. Households anticipated the largest income gains since the November 2008 survey, although the expected gain was still small at just under 1%.
Employment Gains Expected
The survey also found that anticipated gains in the economy meant that consumers held much more favorable job expectations. The survey recorded the most favorable outlook for the unemployment rate since 1984. Less than one-in-five consumers anticipated any further increases in the unemployment rate during the year ahead in the October 2012 survey.
Consumer Sentiment Index
The Sentiment Index was 82.6 in the October 2012 survey, up from 78.3 in September and 74.3 in August, and well above last October’s 60.8. The largest gains were in the Expectation Index, which improved by 7.5% from a month ago and by 52.8% from the disastrous lows following the debt ceiling debate a year ago. In contrast, the Current Conditions Index was 88.1 in October, up from 85.7 in September but just below August’s 88.7.
The survey found the current conditions were judged to be 17.6% better than last year.
The “Survey of Consumers” chief economist Richard Curtin said in a release:
“The very positive economic expectations of consumers stand in sharp contrast to growing concerns expressed by investors and companies about the impending fiscal cliff as well as the impact of a slowing global economy. While the surge in confidence will act to bolster consumer spending during the upcoming holiday season, it also means that this higher level of optimism is more vulnerable to reversal depending on how and when the fiscal cliff is bridged. The surge in consumer optimism may be largely due to the implied election promises of both candidates that most of the Bush tax cuts and the payroll tax cuts will be promptly extended.”
A recent Gallup poll released last Thursday came to the same conclusions. According to Gallup “For the first time in more than five years, slightly more Americans are feeling financially better off than they were a year ago, rather than worse off, by 38% to 34%. This represents a significant improvement since May of President Barack Obama’s first year as president, when the majority — 54% — said they were worse off.”
What does this mean politically? Here is what Gallup said:
“Americans are not as positive today about their personal finances as they were in 1996 before Bill Clinton won a second term. The 49% who felt financially better off in March of that year is the highest Gallup has seen in a year in which an incumbent president runs for re-election.
Still, while fairly low on an absolute basis, the 38% of Americans feeling better off today is on par with what Gallup found before the 2004 and 1984 elections, when Presidents George W. Bush and Ronald Reagan won their re-election bids. Those figures were 41% in November 2003 and 39% in September 1984, respectively”
So, the good news is Americans now believe the economy is getting better, and many believe their personal finances are getting better. It looks like these people can say yes they are better off today than they were four years ago, or even five years ago.
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