Consumer Sentiment Index Jumps to Highest Since in January 2008The markets may have had a lousy week as oil prices surged, thanks to continued political unrest in the Middle East. Plus, fourth-quarter U.S. GDP growth was revised down to 2.8% from 3.2%. But the consumer sentiment index rose to a better-than-expected 77.5 in February -- its highest level since January 2008.

The consensus prediction of economists surveyed by Bloomberg had been for the final February sentiment reading to be unchanged from its preliminary reading of 75.1, up from January's revised 74.2 tally. The index was at 74.5 in December, 71.6 in November and 67.7 in October. In December 2007, at the start of the recession, the index stood at 88.9, and it hit a cycle low of 55.3 in November 2008, during the financial crisis' acute stage.

The consumer sentiment survey took place before the Commerce Department's announcement Friday of the revised GDP data, which showed the world's largest economy grew at a slower pace in the fourth quarter than first projected. The revision was attributed to a slightly smaller increase in consumer spending and a much larger decline in state and local government spending.

In the fourth quarter, consumer spending rose at a 4.1% annual rate, compared to the 4.4% previous estimate. State and local government spending declined at a 2.4% rate, compared to the previously estimated 0.9% dip. In the third quarter, consumer spending rose 2.9%.

Inflation Expectations Unchanged

A closer examination of the sentiment survey shows that its current economic conditions component surged 5.1 points to 86.9 -- its highest reading since January 2008, indicating rising optimism about the present. The consumer expectations component rose to 71.6 in February from 69.3 in January.

Consumers' outlook on inflation remained the same in February. The one-year outlook was unchanged at 3.4%; the five-year inflation outlook was also unchanged at 2.9%.

Economists, business executives and policymakers monitor the consumer sentiment index because, historically, consumer attitudes have been correlated with decisions to spend. In general, rising sentiment leads to increases in consumer spending, or the maintenance of a level of spending, while falling consumer sentiment precedes more frugal behavior.

Oil Price Spikes Could Weigh on Sentiment

February's consumer sentiment report can be read as a qualified win for the economic bulls. It's qualified because although consumer sentiment has risen for the past six months -- roughly in sync with the strengthening U.S. economy and improving job market -- the rapidly changing geopolitical climate makes even the latest consumer survey feel less than current.

Case in point: The Middle East uprisings that have pushed oil prices up more than 10% in the past two weeks to about $97 per barrel. If crude prices continue to rise or remain near $100, that will trigger a prolonged rise in gasoline and diesel prices, which would weigh on consumer sentiment. High energy prices cut Americans' disposable income and increase business operating costs.

However, if Mideast political conditions stabilize and oil retreats back to levels of $80 to $85 per barrel or lower, the uptrend in consumer sentiment will likely continue. That would help support consumer spending -- and corporate revenue and earnings growth -- in the quarters ahead.

Increase your money and finance knowledge from home

Managing your Portfolio

Keeping your portfolio and financial life fit!

View Course »

Getting out of debt

Everyone hates debt. Get out of it.

View Course »

Add a Comment

*0 / 3000 Character Maximum


Filter by:

The survey was done on economists. Are these the guys that run the FED, or Dept of Tres. or Goldman, or JP Morgan ?

February 28 2011 at 7:46 AM Report abuse +1 rate up rate down Reply

YEAH RIGHT.....who writes this garbage?

February 28 2011 at 1:39 AM Report abuse +1 rate up rate down Reply

Nationalize the Oil compasnies and pay off the National Debt

February 28 2011 at 1:29 AM Report abuse rate up rate down Reply


February 28 2011 at 1:27 AM Report abuse +2 rate up rate down Reply

Which group of Wall Street CEO's did they poll for this one?

February 28 2011 at 12:03 AM Report abuse +2 rate up rate down Reply

Consumer Sentiment was before the last weeks run up in gas prices it is in the $hitter now.
Mid-east unrest.How about a little American unrest over speculators running the price of crude up. Enough American unrest and we can get crude taken of the New York Stock Exchange. It should not be there, it should be on the commodity market and controlled. No more gambling on crude if you want to gamble go to the casinos,

February 27 2011 at 11:28 PM Report abuse +1 rate up rate down Reply


February 27 2011 at 4:07 PM Report abuse +2 rate up rate down Reply

what are you drinking?

February 27 2011 at 1:29 PM Report abuse +1 rate up rate down Reply
Samir semaan

For the last two months americans recieve tax credits specially for the rich didn't improve the economy why? because the economy moves on housing and manufacture if one is lacking the other suffer and the economy tumble and this is the situation. As for cutting deficit unless you cut 35% of Defence and you don"t waste on social services you do not do anything.

February 27 2011 at 9:32 AM Report abuse +2 rate up rate down Reply

I'll have to admit, it appears that we are in a sustained recovery. I'm a little concerned at the rise in fast-food prices, however, so long as these additional dollars go primarily to cover wholesale price increases, as well as for decent pay for these hard-working people, I'm OK with spending a little extra. This is NOT a case where unionized-employees are gouging us all. These are the folks who live in Realityville, USA. Ahem! As we turn to oil prices... I continue to believe, that oil prices will fall. Also, I predict that gold is in grave danger! Please, if you are a modest-sized investor, don't over-allocate to gold! Gold is NOT a growth stock... When something has acted uncharacteristically, as gold has, it's only a matter of time until the baloon pops! Begin quietly selling your gold, edging toward the exit, taking profits as you go AND never, ever play gold, again. It's a part of a complex-strategy, that not even I, am qualified to execute. So, we see that commodities are not only volatile instruments for big-time experts, we also see that the future looks extraordinarily bearish. Stocks will continue to provide superior gains, in the near and long-term. Look for best-in-class, worldwide corporations. I'm uncertain about dividend plays, but bonds do not seem to be in anyone's best interest, except for the big-boys. Traditional savings plans, select stocks, and income producing activities, such as work or government benefits, are hard to beat. If you can work, there is nothing more satisfying to the soul. Man is happiest, when he is serving others. There's really no dollar amount that I can put on that. Volunteerism is perhaps the highest honor that anyone can aspire to. Above all, never loose sight of why you are investing. Some people end up hoading money, which is never spent. It's very sad. If you are nearing the time when you shall meet the Lord, enjoy giving to others, as your heart desires. Don't let some court decide who your life's fortune will benefit. It's yours. Besides, the greatest investment is in one's heart. God will always care for you, so long as you put your trust in Him and ackowlege His great love. What kind of security cannot loose? Love and kindness. Good night.

February 26 2011 at 9:41 PM Report abuse -3 rate up rate down Reply