A preliminary report released by the University of Michigan on Friday showed an unexpected improvement in U.S. consumer sentiment in the month of March.
The preliminary reading on the consumer sentiment index for March came in at 102.0, up from the final February reading of 99.7. Economists had expected the index to edge down to 99.3.
“Consumer sentiment rose in early March to its highest level since 2004 due to a new all-time record favorable assessment of current economic conditions,” said Richard Curtin, the survey’s chief economist.
He added, “All of the gain in the Sentiment Index was among households with incomes in the bottom third (+15.7), while the economic assessments of those with incomes in the top third posted a significant monthly decline (-7.3).”
The report said the current economic conditions index jumped to 122.8 in March from 114.9 in February, while the index of consumer expectations fell to 88.6 from 90.0.
The drop by expectations index came as favorable mentions of the Republican tax reform legislation were offset by unfavorable references to President Donald Trump’s tariffs on steel and aluminum imports.
“Importantly, near term inflation expectations jumped to their highest level in several years, and interest rates were expected to increase by the largest proportion since 2004,” said Curtin.
On the inflation front, one-year inflation expectations rose to 2.9 percent in March from 2.7 percent in February, while five-year inflation expectations held at 2.5 percent.