Consumer confidence lifted by lower gas costs

U.S. consumer sentiment improved more than expected in January, propelled by falling gasoline prices and a favorable view of personal finances and the economy, a survey showed Friday.

The preliminary January reading on sentiment by the Reuters/University of Michigan Surveys of Consumers rose to 98 from 91.7 at the end of December.

This was the highest since 103.80 in January 2004, and well above the 92.5 median forecast of analysts polled by Reuters.

“Consumers reported more favorable assessments of their personal finances and anticipated a higher rate of economic growth,” Richard Curtin, director of consumer surveys at the University of Michigan, said in a statement.

The news prompted analysts and traders to scale back their expectations that the Federal Reserve would trim short-term interest rates in the first half of 2007.

“This was a nice upside surprise that continues the run of generally favorable U.S. data that have tempered concerns about the health of the economy,” said Alex Beuzelin, senior market analyst at Ruesch International in Washington.

Although generally upbeat, consumers remain worried about inflation. The survey’s one-year inflation index edged up to 3% from 2.9% in December.