The State of the Consumer

The Thomson Reuters/University of Michigan's final reading on the overall index of consumer sentiment rose to 73.8 from 72.9 in December, topping economists' forecasts for 71.5.

It also marked an improvement from early January's 71.3 preliminary figure, which had been the lowest level in over a year. Survey interviews were done before data earlier this week showed the economy contracted in the fourth quarter.

The agreement reached in Washington earlier in January averted the full brunt of tax increases and spending cuts that had been set to come into effect. But taxes did increase for some Americans, and a 2 percent reduction in payroll taxes came to an end.

Politicians still face a round of budget decisions in the first half of the year, including large automatic federal spending cuts that are looming as of March.

Consumers were nearly equally split on the economy's prospects in 2013, with 28 percent expecting it to improve and 24 percent expecting it to worsen.

The barometer of current economic conditions eased to 85 from 87, while the gauge of consumer expectations climbed to 66.6 from 63.8.

One-year inflation expectations edged up to 3.3 percent from 3.2 percent, while the survey's five-to-10-year inflation outlook held steady at 2.9 percent