With consumers anticipating larger income gains and lower inflation during the year ahead, the University of Michigan released preliminary data on Friday unexpectedly showing a continued improvement in U.S. consumer sentiment in the month of October.
The report said the consumer sentiment index climbed to 96.0 in October after rising to 93.2 in September. The continued increase surprised economists, who had expected the index to drop to 92.0.
The consumer sentiment index continued to recover after plummeting to a nearly three-year low of 89.8 in August.
Surveys of Consumers chief economist Richard Curtin said the unexpected increase in consumer sentiment came as real income expectations rose to their most favorable level in two decades.
Curtin said "stronger finances and lower interest rates helped to modestly bolster buying plans" but noted "these favorable trends did not change consumers' overall prospects for the national economy."
"A slower pace of overall economic growth is still anticipated, including some modest increases in the national unemployment rate during the year ahead," he added.
The report said the current economic conditions index jumped to 113.4 in October from 108.5 in September, while the index of consumer expectations edged up to 84.8 from 83.4.
On the inflation front, one-year inflation expectations tumbled to 2.5 percent in October from 2.8 percent in September, while five-year inflation expectations dropped to 2.2 percent from 2.4 percent.