Consumer Sentiment Unexpectedly Surges Higher

American optimism about the economy surged in October, fueled by the best expectations for income gains in two decades.

The University of Michigan’s Consumer Sentiment Index rose to 96 this month from 93.2 in September. That is the highest level in three months.

Economists surveyed by Econoday had forecast a decline to 92.

“Sentiment rebounded in early October as consumers anticipated larger income gains and lower inflation during the year ahead. As a result, real income expectations rose to their most favorable level in two decades,” Richard Curtin, the survey’s chief economist, said in a statement.

The index’s current situation component rose sharply in the first weeks of September, hitting 113.4 from 108.5, the highest level this year. The expectations component, which asks consumers to forecast conditions six months from now, ticked up from 83.4 to 84.8.

“Overall, the data indicate that consumption spending will be strong enough to offset weakness in business investment spending so as to keep the economy expanding into 2020,” Curtin said.