U.S. Consumer Sentiment Climbs More Than Forecast: Economy
January 15, 2012, 4:46 AM ESTBy Bob Willis
(Updates with closing markets in sixth paragraph.)
Jan. 13 (Bloomberg) -- Confidence among U.S. consumers increased more than forecast in January, reaching its highest level in eight months on signs the labor market is improving.
The Thomson Reuters/University of Michigan preliminary index of consumer sentiment climbed to 74 from 69.9 at the end of December. The median estimate in a Bloomberg News survey called for 71.5. The measure has increased 9.9 points in the last two months, the biggest such gain since April-May 2009.
The lowest jobless rate in almost three years and cheaper gasoline prices since mid-2011 are giving Americans reason to be more upbeat. While the pickup in optimism will probably help sustain household purchases, limited wage gains and falling real estate values may temper the consumer spending that accelerated in the fourth quarter.
“You get better job growth, people hear about it and you get better sentiment and better spending,” said Maury Harris, chief economist at UBS Securities LLC in New York, whose team was the most accurate in forecasting the U.S. economy in the two years through September. Purchases early in 2012 “may not be quite as strong as the fourth quarter, but I still think you have an acceptable year in consumer spending,” he said.
Estimates of the 68 economists in the Bloomberg survey ranged from 68.5 to 77. The gauge averaged 89 in the five years leading to the last recession.
Stocks fell as euro-region governments braced for credit downgrades and as JPMorgan Chase & Co.’s profit slumped 23 percent. The Standard & Poor’s 500 Index declined 0.5 percent to 1,289.09 at the close in New York.
Wider Trade Deficit
Separate figures today showed the U.S. trade deficit widened more than forecast in November as exports dropped and imports of crude oil and automobiles increased. The gap grew 10.4 percent to $47.8 billion, the widest since June, the Commerce Department said.
“Domestic demand is a bit stronger than external demand as global growth weakens,” said Jeremy Lawson, a senior U.S. economist at BNP Paribas in New York. “The question is whether U.S. consumption can be maintained in the first part of the year post-Christmas. There are a lot of headwinds.”
Growing demand from outside the euro area may be helping stabilize the region’s economy, other data today showed. Exports from the euro area rose a seasonally adjusted 3.9 percent in November from the prior month, led by France and the Netherlands, the European Union’s statistics office said in Luxembourg. The gain helped the monthly trade surplus swell to the highest level since July 2004.
In Asia, the Bank of Korea held off from raising borrowing costs for the seventh straight month, highlighting growing risks to its economy from Europe’s debt crisis even as a weaker won threatens to fuel inflation.
Consumer Outlook
The Michigan survey’s index of consumer expectations for six months from now, which more closely projects the direction of U.S. household spending, rose to 68.4 this month, the highest since May, from 63.6 in December.
The index of current conditions, which reflects Americans’ perceptions of their financial situation and whether they consider it a good time to buy big-ticket items like cars, increased to 82.6, the highest since February, from 79.6.
The labor market is showing signs of improving. The unemployment rate in December fell to 8.5 percent, the lowest since February 2009, and the economy generated 200,000 jobs, double the prior month, the Labor Department said on Jan. 6.
While gasoline prices have risen in recent weeks, they’ve fallen since reaching a high last year of $3.99 a gallon in May. Regular unleaded gasoline was $3.39 a gallon yesterday, according to AAA, the nation’s largest automobile association.
Other Measures
Today’s sentiment figures mirror other measures. The Bloomberg Consumer Comfort Index in the period ended Jan. 8 reached its highest level in six months. The Conference Board’s confidence gauge increased in December to the highest level since April.
The U.S. economic expansion was improving at the end of 2011 across most of the country while housing remained stagnant, the Federal Reserve said this week.
The economy “expanded at a modest to moderate pace” from late November through the end of December on increased holiday retail sales, demand for services and oil and gas extraction, the Fed said in its Beige Book survey released Jan. 11 in Washington. At the same time, the housing market remained “sluggish.”
Merchants like Williams-Sonoma Inc. cut prices during the most important shopping season of the year amid concern stagnant wages and lower property values would hold customers back.
Chief Executive Officer Laura Alber said Williams-Sonoma faced “greater challenges” because of discounting on nationally branded products.
--With assistance from Chris Middleton in Washington. Editors: Vince Golle, Carlos Torres
To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net
