"Consumers are feeling more optimistic about their personal finances and the general direction of the economy," said IHS Global Insight Economist Chris Christopher.
CLEVELAND, Ohio -- As retailers wind down their 2014 Christmas shopping season, shoppers' outlooks remain at their sunniest levels in nearly eight years, indicating that consumers are both optimistic about the economy and willing to splurge a bit more this holiday season.
The Reuters/University of Michigan Consumer Sentiment Index inched up another 4.8 points in December, to 93.6 -- its highest level since January 2007. Consumers also gave higher marks to the current economic situation index, up 2.1 points to 104.8, and the expectations index, up 6.5 points to 86.4.
View full sizeA Best Buy employee helps a customer carry out a Samsung Wireless Audio Soundbar in Strongsville, during Black Friday, Nov. 28, 2014. "Consumers are feeling more optimistic about their personal finances and the general direction of the economy," said IHS Global Insight Economist Chris Christopher, in a statement. "The main drivers of the sudden surge in consumer sentiment are lower gasoline prices, improved job prospects, and positive news on the consumer front."
The Reuters/University of Michigan Consumer Sentiment Index is more than 13 percent higher than it was this time last year, he said. "And no matter how one slices and dices the numbers -- by age, by household income, or by geographic location -- American consumers are feeling more optimistic."
Consumer spending in November grew at its strongest clip since August. Personal income increased 0.4 percent, while wages and salaries increased 0.5 percent. "Due to the colder November weather, heating bills were higher, but that did not keep consumers at home," Christopher said. "Auto unit sales were stellar as was discretionary spending."
View full sizeA shopper considers a display of remote controlled cars at Toys 'R' Us in Parma during Black Friday, November 28, 2014. The International Council of Shopping Centers' weekly chain store sales figures show that "shoppers came back to life in the past two weeks after hanging low during Black Friday week," Christopher said.
"This is good news for retailers, since the last quarter of the year is extremely important and plays a significant role in retailers' annual margins and profits ... [and] elevated levels of consumer sentiment assist in discretionary spending on big-ticket items."
IHS Global Insight said, "We expect 2014 holiday retail sales to increase 4.2 percent," compared to 3.1 percent in both 2012 and 2013. Holiday sales are defined as not-seasonally-adjusted retail sales, excluding motor vehicles, gasoline, and food services for November and December.
"Clearly, the fourth quarter and the New Year are looking rather bright on the consumer spending front," he said. "We expect real consumer spending and consumer confidence to gain significant traction in 2015."
Shopping Days Left Until Christmas