US consumer sentiment rises to highest level since 2004

The University of Michigan said Friday that its index of consumer sentiment rose to 98.1 in January from 93.6 last month.

Consumers say the prospects for the U.S. economy are the strongest in a decade, and half of consumers expect the expansion to keep going another five years. Over the past six months, households with annual incomes of less than $75,000 have reported gains in confidence as big as households with higher incomes.

Still, most consumers are expecting only modest wage income gains, which could constrain their spending. "Without sufficient wage gains, consumers will be forced to demand large price discounts to complete their purchases," said Richard Curtin, chief economist for the Michigan survey.

The Michigan survey was the latest evidence that an improving economy and tumbling oil prices have lifted consumers' spirits. The Conference Board on Tuesday reported that its consumer confidence index climbed to the highest level since August 2007.

And the Commerce Department reported Friday that consumer spending rose from October through December at a 4.3 percent annual pace, fastest since the first three months of 2006.

Underlying consumers' improving mood: The job market is the strongest it's been in years. Employers last year added nearly 3 million jobs, most since 1999.

Gasoline prices have plunged to $2.05 a gallon from $2.27 a month ago and $3.28 a year ago, according to AAA.

Overall, the economy grew at a steady 2.6 annual rate the last three months of 2014. For the full year, it grew a modest 2.4 percent, pulled down by bitter winter weather at the start of 2014. Over the last nine months of last year, economic growth averaged at a healthy 4.1 percent annual rate.