US consumer sentiment races to 2-1/2-year high

WASHINGTON, Jan 20 (Reuters): US consumer sentiment improved in January, hitting the highest level in 2-1/2 years amid growing optimism over the outlook for inflation and household incomes, which bodes well for the economy's prospects this year.

The better-than-expected reading in sentiment reported by the University of Michigan on Friday reflected a brightening of moods across all age and income groups, education and geographical locations as well as political affiliation.

It suggested that Americans were finally warming up to the economy's resilience after much anxiety over high inflation, which has weighed on President Joe Biden's popularity. Consumers' inflation expectations over the next 12 months were the lowest in three years, good news for the Federal Reserve.

"The economy is not going backwards, it is going forwards at the start of 2024," said Christopher Rupkey, chief economist at FWDBONDS in New York. "For the first time, massive interest rate hikes have not put a damper on economic growth."