Consumer confidence improved in January to a three-month high as Americans grew more upbeat about the prospects for the economy, labor market and their incomes.

The Conference Board’s index of sentiment advanced to 98.1 in January from a revised 96.3 a month earlier, the New York-based private research group said Tuesday. The median forecast of economists in a Bloomberg survey called for the measure to hold at the previously reported December reading of 96.5.

While a plunge in stock prices may have tempered views about current conditions, a resilient labor market, falling gas prices and low inflation overall are buoying views of the economic outlook. The pickup in sentiment extended to buying plans as a greater share of households said they intend to buy cars and appliances.

“All of the improvement was in expectations, which many people believe are a driver of big-ticket purchases," said Scott Brown, chief economist at Raymond James Financial Inc. in St. Petersburg, Florida. "You are looking at a better business outlook, a better outlook for household income. It was mostly positive across regions too, so it’s fairly broad-based."

David Fuller's view

This makes sense to me.  Moderate US GDP growth has driven down unemployment, although there is inevitably some dissatisfaction over the disparity in salaries.  Nevertheless, most consumers are clearly benefitting from the drop in oil prices.  Additionally, inflation is not just low, it has been held down by some very positive deflation from this era’s accelerated rate of technological innovation. 

Many financial commentators will have been unsettled by Wall Street’s weak stock market performance during most of January.  While Fuller Treacy Money continues to expect a choppy market environment, I also think that some of the extreme bearish forecasts which we have heard recently are not justified, at least not regarding most developed economies.  

Yes, global GDP has been held back by the severe recessions experienced by primarily commodity producing nations.  Interestingly, most of these countries should now experience some welcome respite in the form of rallying commodity prices as the overproduction of industrial resources such as oil and metals subsides. These highly cyclical commodities appear to be on the brink of at least medium-term recoveries.

Lastly, the next US President, presumably Hillary Rodham Clinton, could certainly help the US economy and millions of blue collar workers by launching a way overdue infrastructure overhaul for the US economy next year.