US consumer sentiment rebounded sharply in early December, topping all forecasts as households dialed back their year-ahead inflation expectations by the most in 22 years.

The University of Michigan’s consumer sentiment index jumped 8.1 points to a four-month high of 69.4, the preliminary December reading showed. The median estimate in a Bloomberg survey of economists called for the gauge to edge up to 62.

Consumers see prices rising at an annual rate of 3.1% over the coming year, the lowest level since March 2021. The 1.4 percentage points decline from the prior month was the largest since October 2001.

They see costs rising 2.8% over the next five to 10 years, matching the lowest since September 2022 and down from last month’s 3.2%, the report showed Friday.

“Overall, consumers feel more confident about the economy than they did over the past few months, which will likely provide some support to spending despite a modestly weakening labor market,” Joanne Hsu, director of the survey, said in a statement.

Nevertheless, “consumers still feel pinched by high prices,” Hsu said.

While the costs of many goods and services remain elevated — keeping sentiment well below pre-pandemic levels — gasoline prices have steadily fallen since the end of September. Prices at the pump, which influences Americans’ inflation expectations, are the cheapest they’ve been all year.

Consumers’ perception of their financial situation improved to a three-month high. Despite higher borrowing costs, the university’s report showed buying conditions for durable goods advanced to the highest level since June 2021.

The current conditions gauge rose to a four-month high, and a measure of expectations climbed to the highest level since July.

This article was provided by Bloomberg News.