[ForexNews]

University of Michigan consumer sentiment jumped higher in the final April report to 65.1 from 61.9 in the preliminary release and 57.3 in March. This shows a marked improvement in sentiment in the past two weeks of the month. The index of present conditions increased to 68.3 from 66.6, while the index of future conditions rose to 63.1 from 58.9. Consumer sentiment is now at the highest level since March of last year. The improvement in consumer sentiment is encouraging, consistent with market forecast for a gradual pickup in spending.

A number of factors are likely responsible for this improvement. First, the stock market (based on broad measures) posted its biggest increase since 1991 in April. Second, the aggressive policy response by the Obama administration has been, for the most part, perceived well. About 65% of respondents believe the policies will be effective in improving the economy, and 43% felt they would improve their financial situation. Third, the deep discounts from retailers and in the housing market have improved buying conditions.

On the inflation front, consumers expect inflation of 2.8% over the year ahead, down slightly from the 3.0% in the preliminary survey but up from the 2.0% print in March. Over the longer run, consumers expect inflation of 2.8%, up from 2.7% in the preliminary survey and 2.6% in March. This may alleviate a bit of the Fed's concerns about deflation risks.