Consumer sentiment is on the rise, beating all forecasts as it rose to 64.2 for October according to the Thomson Reuters/University of Michigan's preliminary reading. Consumer expectations were also up considerably, increasing to 56.2 from 51.8. The survey suggested that respondents believe the economy is not likely to worsen in the year ahead, with the current economic conditions index up to 76.6 from 75.1.

Twenty-seven percent of respondents expect unemployment to rise, which is down from 43% three months ago, signaling that respondents believe employment conditions are getting better.

However, only one in five consumers expects improvement in their finances for the next year. With consumer spending accounting for around 70% of U.S. economic activity, the positive outlook in consumer sentiment needs to continue. Still, there is hope on the horizon as Steve Blitz, senior economist at ITG Investment Research, said, “Things are better than they were a year ago and it normally takes these sentiment indicators time to turn around.”

Inflation is expected to remain steady at 3.2% for one year, according to respondents. Survey director Richard Curtin said, "Although improved, a renewed downturn in the economy still has an uncomfortably high probability of occurring."

Source: Thomson Reuters/University of Michigan