By Ruth Mantell, MarketWatch
WASHINGTON (MarketWatch) — Led by more cheerful views on current economic conditions, a gauge of consumer sentiment rose to the highest level in three months, exceeding estimates, according to data released Friday.
The University of Michigan-Thomson Reuters consumer-sentiment gauge rose to a preliminary February reading of 76.3 — the highest level since November — from a final January reading of 73.8.
Stocks remained higher after the data. Read: U.S. stocks rise after data.
Economists polled by MarketWatch had expected a February reading of 75, due to higher stock prices, though there are also negative factors, such as ongoing fiscal uncertainty, and higher payroll taxes and gas prices. See economic calendar.
The gauge increased in January after plunging in December, when consumers were worried about the fiscal cliff.
“Despite the improvement in early 2013, consumer sentiment has not fully recovered the fiscal cliff-related deterioration in late 2012, likely because the resolution still resulted in higher taxes,” wrote analysts at New York-based RDQ Economics in a research note.
The sentiment gauge, which covers how consumers view their personal finances as well as business and buying conditions, averaged about 87 in the year before the most recent recession.
Economists watch sentiment data to get a feel for the direction of consumer spending. It seems likely that higher payroll taxes are taking a toll on retail spending. Earlier this week, the U.S. Department of Commerce reported that retail sales rose just 0.1% in January after growing 0.5% in December.
Looking forward, higher payroll taxes could continue to eat into confidence and spending as consumers adjust their spending habits. Read more about retail spending.
The University of Michigan’s gauge of consumers’ views on current economic conditions increased to 88 in February from 85 in January.
The barometer of consumers’ expectations increased to 68.7 from 66.6.
Ruth Mantell is a MarketWatch reporter based in Washington. Follow her on Twitter @RuthMantell.
