With consumer expectations showing a significant rebound, the University of Michigan released a report on Friday showing a much bigger than expected improvement in U.S. consumer sentiment in the month of August.
The report said the preliminary reading on the consumer sentiment index for August jumped to 97.6 from the final July reading of 93.4. Economists had expected the index to inch up to 94.0.
"Consumer confidence rose in the first half of August to its highest level since January due to a more positive outlook for the overall economy as well as more favorable personal financial prospects," said Richard Curtin, the survey's chief economist.
Reflecting the improvement in expectations, the index of consumer expectations surged up to 89.0 in August from 80.5 in July.
On the other hand, the report said the current economic conditions index fell to 111.0 in August from 113.4 in the previous month.
Curtin said the fallout from last weekend's violent events in Charlottesville, Virginia, is likely to reverse the improvement in economic expectations recorded across all political affiliations in early August.
"Moreover, the Charlottesville aftermath is more likely to weaken the economic expectations of Republicans, since prospects for Trump's economic policy agenda have diminished," Curtin said.
He added, "Nonetheless, the partisan difference between the optimism of Republicans and the pessimism of Democrats is still likely to persist, with Independents remaining as the bellwether group."
On the inflation front, one-year inflation expectations remained unchanged at 2.6 percent, while five-year inflation expectations edged down to 2.5 percent in August from 2.6 percent in July.
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