(Reuters) - U.S. consumer sentiment rebounded unexpectedly in early April from a decade low with the strong job market lifting the outlook for wage growth and a fall in gasoline prices from the previous month's record high helping to cap expectations for a further acceleration in inflation, a survey showed on Thursday.
The University of Michigan's Consumer Sentiment Index rose to 65.7 on a preliminary basis this month from a final reading of 59.4 in March, which had been the lowest since 2011. That topped expectations for a reading of 59, according to a Reuters poll of economists, and helped snap a skid of three consecutive monthly declines.
The increase came almost entirely from a jump in the expectations index to 64.1 on a preliminary basis from a March final level of 54.3. Assessments of current conditions were little changed.
Consumers' estimates for the rate of inflation over the next year were unchanged at 5.4%, which is the highest since 1981 and signals that consumers have some faith that measured inflation will recede from a four-decade high of 8.5% hit in March. And, for a third straight month, they estimated inflation over the next five years at 3.0%.
The U.S. Federal Reserve last month lifted interest rates for the first time since 2018 and officials there have signaled an aggressive campaign of rate hikes in the months ahead to rein in inflation.
The improvement in expectations was powered by a 29.4% jump in the economic outlook for the year ahead and a 17.2% increase in personal financial expectations, survey Director Richard Curtin said in a statement.
"A strong labor market bolstered wage expectations among consumers under age 45 to 5.3% - the largest expected gain in more than three decades, since April 1990," Curtin said.
He also said consumers estimated a negligible change in gas prices in the year ahead after the previous month's prediction that they would rise by nearly 50 cents a gallon a year out.
Gas prices have dropped by more than 25 cents a gallon after hitting a record $4.33 in early March, according to AAA.