Americans entered 2007 more confident than at any time in three years as energy prices retreated and a strengthening labor market pushed wages higher.
The Reuters/University of Michigan’s preliminary index of sentiment rose to 98 this month, higher than forecast, from 91.7 in December. The gauge averaged 87.3 in 2006.
Gasoline prices are down 28 percent since August, leaving more cash in the pockets of consumers, whose spending accounts for more than two thirds of the economy. The report caps a week of figures showing a rebound in housing, gains in industrial production and a drop in jobless claims to an 11-month low.
“The year is starting off on a solid footing, helped significantly by the dividend of lower oil prices,” said Lynn Reaser, chief economist at Investment Strategies Group at Bank of America Corp. in Boston.
“The housing slump remains a dampening force, but it has been overwhelmed by these other positive factors.”
Companies have also been confident enough in the economy to keep spending. Stronger orders of large equipment including power-plant turbines helped drive a 12 percent increase in fourth-quarter earnings at General Electric Co. Total orders rose 19 percent during the quarter and sales grew 8 percent.
The University of Michigan’s expectations index, which some economists view as an indicator of future consumer spending, rose to 88.7, the highest since December 2004, from 81.2.
