US consumers raised their optimism about the US economy for the third straight month in February to cap a week that offered investors a complicated picture.

The initial read on consumer sentiment in February from the University of Michigan out Friday showed the index inched higher from January, suggesting "that consumers continue to feel more assured about the economy, confirming the considerable improvements in December and January across various aspects of the economy," said Joanne Hsu, director of the survey of consumers.

The index registered a reading of 79.6, up from the 79.0 seen in January's final look at sentiment but slightly below the 80 that was expected by economists.

Overall, sentiment is about 30% higher than it was in November.

This report's release came just 90 minutes after the January read on producer prices served as the week's second sign inflation pressures are reappearing in the US economy.

Earlier this week, January's Consumer Price Index (CPI) report showed consumer prices rose more than expected last month while retail sales registered their largest monthly drop in almost a year to start 2024.

Read more: Inflation update on everyday expenses: Prescription drugs down, pet care way up

So far, a more complicated outlook for the Federal Reserve — which could see plans for an interest rate cut in the first half of this year delayed by inflation pressures — has left investors and consumers undeterred.

The stock market closed at a record high on Thursday. And as data from Bank of America showed earlier this week, investors haven't been this optimistic about the economic outlook in two years.

In Friday's report, Hsu noted, "Consumers continued to express confidence that the slowdown in inflation and strength in labor markets would continue."

Hsu added: "Five-year expectations for business conditions rose 5% to its highest reading since December 2020."

Between enthusiasm over AI, an improved backdrop for corporate profits boosting the stock market, and consumer expectations for the next several years on the rise, it becomes challenging for investors to get too worked up about producer prices rising more than expected or retail sales logging a one-month plunge.

Treasury yields rose Friday morning following the PPI report. And growing ambiguity over the Fed's next move will likely keep volatility a fixture within the bond market.

But a complicated week for the economic outlook doesn't change the broad strokes of the picture for now.

"The data flow at the turn of the year has been choppy and confusing," wrote Bank of America economist Michael Gapen in a note on Friday.

"Our (perhaps unsatisfying) take is that investors should remain in wait-and-see mode," the firm added.

"The surprises in jobs, inflation, retail sales, and [industrial production] were all probably a combination of signal and noise. ... We need to see a few more weeks' worth of data before drawing strong conclusions on the trajectory of the economy."

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