With an improvement in consumer expectations more than offsetting concerns about current conditions, the University of Michigan released a report on Friday showing a much bigger than expected increase in U.S. consumer sentiment in the month of October.

The preliminary report said the consumer sentiment index rose to 81.2 in October from the final September reading of 80.4. Economists had expected the index to inch up to 80.5.

The bigger than expected increase by the headline index came as the index of consumer expectations climbed to 78.8 in October from 75.6 in September, reaching its highest level since March.

On the other hand, the report said the current economic conditions index fell to 84.9 in October after jumping to 87.8 in September.

"Slowing employment growth, the resurgence in covid-19 infections, and the absence of additional federal relief payments prompted consumers to become more concerned about the current economic conditions," said Surveys of Consumers chief economist Richard Curtin.

Curtin added, "Those concerns were largely offset by continued small gains in economic prospects for the year ahead."

On the inflation front, the report said one-year inflation expectations inched up to 2.7 percent in October from 2.6 percent in September, while five-year inflation expectations fell to 2.4 percent from 2.7 percent.

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