Consumer Sentiment Index rose by 10% in December, while still below its early summer levels, it is a whopping 13% above its last year’s level.

This improvement in consumer outlook is shared equally between households with higher as well as lower income levels. And according to the researchers, the end of government shutdown, slight improvement in personal finances and the increase in the value of homes and stock market on top of sales discounts gave consumers a higher confidence toward purchases.

The gain in personal finances is mostly due to the increase the stock market which is enjoyed primarily by the top income level households.

Consumers’ outlook on the job market for 2014 is positive, they expect unemployment rate to drop due to strengthening economic conditions.

While consumers expect employment to increase, they do not anticipate their income to increase significantly, actually they expect their raises for 2014 to be less than the rate of inflation

According to the researchers, consumers’ attitude toward buying homes, cars and consumer durables improved in December

These are all great news for the economy, with the qualifier that consumer confidence was higher than now back in July, and political shenanigan cut it down by 12%. Despite the budget agreement and the appearance of some adult supervision in Washington, according to the researchers, consumer confidence in Washington’s economic polices has not improved.

The FED has pumped a trillion dollars a year into the bond market for a while with the hope that it will cause the stock market to rise and as the result of that consumers will feel wealthier and that will induce more consumer expenditures. At least that is the theory. It is however, astonishing to see that the most rapid stock market gains happened this year and after the FED announced that it may taper its monetary injections into the bond market 6 months ago.
There is no doubt that the FED’s liberal monetary policy pumped up the stock market, but there appears that there are real improvements in the economy which are also helping the stock market up.