US consumer sentiment advances in early November

The University of Michigan index of consumer sentiment rose to 93.1 in the preliminary November estimate, outpacing our (91.0) and consensus expectations (91.5) for a modest mid-month gain. The current conditions index rose to 104.8 (previous: 102.3) and consumer expectations improved to 85.6 (previous: 82.1). In an encouraging signal for household incomes, median 1-2 year income expectations rose to 1.8% (previous: 1.5%).

The survey highlights that the improvement in sentiment was led by the bottom two-thirds of the income distribution. This group of consumers expected larger income gains than other survey respondents. Along with the two-tenths decline in year-ahead income expectations (2.5%), consumers now have the strongest inflation-adjusted income expectations since 2007.

Better expected incomes continue to support purchases of durable goods. Purchasing sentiment for major household items rose back toward its post-recession high, and vehicle-buying sentiment surged to 151 (previous: 140).

"We expect solid household income gains to continue through the fourth quarter, and look for the US consumer to remain the bulwark of economic growth", says Barclays.