Consumer sentiment edges up to eight-month high

In the latest sign that the growing economy is having a positive effect on consumer psychology, the Reuters’/University of Michigan’s survey of consumer sentiment rose to its highest level in eight months.

Preliminary data showed that the Consumer Sentiment Index increased from 74.2 in January to a mid-February reading of 75.1. But in an apparent sign that lackluster job growth is hampering the improvement in consumer confidence, the expectations component of the survey slipped.



Nonetheless, the best level since June 2010 shouldn't be taken lightly, as it suggests consumers are feeling slightly more comfortable with their present job situation.  And the hard evidence that many are feeling less queasy about the economy can be seen in the burst in consumer spending at the end of last year that provided a big boost to Q4 GDP.

In the meantime, inflation expectations were unchanged, despite rising gasoline and food prices.

Reasonably-anchored short-term inflation expectations plays well for Fed Chairman Ben Bernanke, who has publicly stated that the Fed has the tools to implement an exit strategy and keep inflation under wraps.