U.S. consumer sentiment soared in early January to the highest since 2021, far exceeding expectations, as short-term inflation expectations slipped to a three-year low.

The University of Michigan’s consumer sentiment index rose 9.1 points to 78.8, the biggest monthly advance since 2005. The preliminary January reading surpassed all estimates in a Bloomberg survey of economists.

Consumers expect prices will climb at an annual rate of 2.9% over the next year, down from the 3.1% expected a month earlier. They see costs rising 2.8% over the next five to 10 years, a four-month low, data Friday showed.

“Consumers exhibited stronger views on multiple facets of the economy, suggesting greater confidence of a soft landing,” Joanne Hsu, director of the survey, said in a statement.

“Improvements in inflation expectations have been supported by perceptions of easing price pressures in buying conditions for both durable goods and vehicles,” she said, adding that consumers increasingly expect the Federal Reserve to lower rates this year.

That’s “consistent with the belief that inflation will not accelerate in the near future,” Hsu said.

The survey showed the pickup in optimism was broad, with improvements across age, income and political affiliation. More than half of households expect their incomes to grow at least as fast as inflation, the highest share since mid-2021.