Consumer sentiment jumped in the second half of March by a record amount as Americans discounted the effects of government spending cuts and saw more healing in the labor market, a survey released on Friday showed.
The Thomson Reuters/University of Michigan's final reading on the overall index on consumer sentiment came in at 78.6, up from 77.6 the month before.
That was well above the median forecast of 72.5 among economists polled by Reuters and a record upward revision from a preliminary reading of 71.8 in mid-March.
Analysts had fretted that the so-called sequester, a package of across-the-board government spending cuts of $85 billion that went into effect in early March, would drag on the economy and dampen sentiment.
But consumers seemed to have brushed those worries off, survey director Richard Curtin said in a statement, and the swell of sentiment in the second half of the month more than erased the decline of the first half of March.
"Consumers have discounted the administration's warning that economic catastrophe would follow the reductions in federal spending, and consumers have renewed their expectation that gains in employment will accelerate through the rest of 2013," he said.
"If the late March results are replicated in the months ahead, however, the economy may finally gain enough upward momentum to significantly reduce the unemployment rate."
The survey also saw the largest proportion of homeowners reporting recent increases in home values in more than five years, with gains expected by more homeowners than any time since the March 2007 survey.
The survey's barometer of current economic conditions rose to 90.7, its highest since January 2008. It was also up from February's 89.0 and above a forecast of 87.8.
The survey's gauge of consumer expectations rose to 70.8, revised up from a preliminary 61.7 and up from February's 70.2. Economists had forecast 62.0.
The survey's one-year inflation expectation fell to 3.2 percent from February's 3.3 percent, while the survey's five-to-10-year inflation outlook was at 2.8 percent versus 3.0 percent.