US CONSUMER sentiment unexpectedly rose to its highest level in five years this month as consumers became more optimistic about the overall economy in a possible boost to President Obama’s re-election hopes next month.

Thomson Reuters/University of Michigan’s preliminary October reading on the overall index on consumer sentiment came in at 83.1, up from 78.3 the month before, and the highest since September 2007, the survey revealed yesterday.

It was well above the median forecast for a slight decline to 78 among economists polled by Reuters.

The new buoyancy among consumers comes shortly after the US unemployment rate tumbled to its lowest level in nearly four years in September as more people returned to the workforce and found jobs than economists had predicted.

“We are getting some quite interesting signals from consumer sentiment and employment data – both unemployment rate and initial claims – that there has been some quite significant improvement in the economy,” said David Sloan, an economist at 4Cast in New York.

US stocks were higher after the news. The SP 500 climbed 0.2 per cent in morning trade but pared some of its earlier gains as equities struggled to make headway after recently climbing to highs not seen in five years.

The unexpected jump in consumer sentiment in October came as consumers felt better about the economy in both the long and the short term, said the compilers of the Thomson Reuters/University of Michigan survey.

“What changed was how they evaluated economic conditions,” said survey director Richard Curtin in a statement. “Economic conditions during the year ahead were expected to be ‘good’ by more consumers, and more consumers expected ‘good’ economic times over the next five years.”

The survey’s gauge of consumer expectations jumped to 79.5 from 73.5, well above an expected reading of 74. Expectations were at their highest since July 2007.

The survey’s barometer of current economic conditions rose to 88.6 from 85.7 and was above a forecast of 86. – (Reuters)