US consumer sentiment index reaches 14-month high

A measure of U.S. consumer confidence reached its highest level since July 2013, led by greater optimism that the economy will grow and incomes will rise.

The University of Michigan said Friday that its index of consumer sentiment rose to 84.6 in September from 82.5 in August. That’s the second highest level in the past seven years, although the index has rarely topped 85 since the Great Recession. Before the downturn, it typically stood above 90.

Still, the sunnier outlook could spur consumers to spend more, which would accelerate economic growth. Consumer spending accounts for about 70 percent of economic activity. But spending growth has been subdued since the recession ended in 2009, averaging at an annual rate of 2 percent. It usually rises above 3 percent in a healthy economy.

Other measures also indicate that consumers’ outlook is brightening. The Conference Board’s consumer confidence index increased to a seven-year high last month.

A big reason Americans have been spending less is that their paychecks have barely kept up with inflation over the past five years. Consumers are now starting to anticipate larger raises: More households expect their incomes to rise in the coming year than at any other time in the past six years.

The typical household expects its incomes to increase 1.1 percent, the most since late 2008, the Michigan survey found. More optimism about wage gains could also drive more spending. Before the recession, Americans generally expected pay gains at about 2 percent to 3 percent a year.

Faster growth may be fueling the more bullish outlook. The economy expanded at a 4.6 percent annual rate in the April-June quarter, the government says, the fastest pace in more than two years.

—CHRISTOPHER S. RUGABER, AP Economics Writer