Confidence among U.S. consumers climbed to a 12-month high in February, signaling household spending will help sustain the expansion.
The Conference Board’s index increased more than forecast, to 70.8 from 61.5 in January, figures from the New York-based private research group showed today. Economists projected the gauge would climb to 63, according to the median estimate in a Bloomberg News survey.
Americans are growing more upbeat after unemployment fell to a three year low and stock-market rally boosted household wealth, helping them withstand lower home prices and higher gasoline costs. Another report showed durable goods orders declined in January by the most since 2009 after the expiration of a tax break allowing full expensing of business equipment purchases.
“We’re seeing further evidence the labor market is better,” said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York. With more improvement, “a self-sustaining feedback loop will become present whereby rising income engenders a further lift in confidence, which in turn lifts spending.”
Stocks climbed, sending the Dow Jones Industrial Average to its first close above 13,000 since 2008. The Dow rose 0.2 percent to 13,005.12 at the close in New York. The yield on the benchmark 10-year Treasury note was little changed at 1.93 percent.
Home prices in 20 U.S. cities in the 12 months that ended in December dropped by the most since July as foreclosures continued to take their toll on the weakest part of the economy, another report showed.
The S&P/Case-Shiller index of property values in 20 cities fell 4 percent from a year earlier, after decreasing 3.9 percent in the year ended in November, a report from the group showed today in New York. The median forecast of 31 economists surveyed by Bloomberg called for a 3.7 percent decline.
Orders for goods meant to last at least three years slumped 4 percent, also more than forecast, after a 3.2 percent gain a month earlier, Commerce Department figures showed. Economists projected a 1 percent drop in durable goods, according to the Bloomberg survey.
Demand for transportation equipment decreased 3.2 percent, the most since October 2010, led by a 19 plunge in commercial aircraft. Orders for business equipment fell 4.5 percent, the biggest decline in a year.
Last month’s decrease in capital goods orders extends a pattern of declines early in a quarter that are typically reversed later. Demand for non-military capital goods such as computers, engines and communications gear has dropped in the first month of a quarter in all but three instances since the end of 2005.
In Europe, economic confidence in the euro area improved more than forecast in February. An index of executive and consumer sentiment in the 17-nation euro area rose for a second month, increasing to 94.4 from 93.4 in January, the European Commission in Brussels said today.
The uptick in European confidence echoed encouraging data from Japan, where retail sales exceeded economists’ forecasts in January, signaling a recovery in consumer spending will help the world’s third-largest economy return to growth this quarter. Sales rose 1.9 percent from a year earlier, after a 2.5 percent increase in December, the Trade Ministry said in Tokyo today.
Estimates for the Conference Board gauge ranged from 60 to 67.8 in the Bloomberg News survey of 77 economists.
The group’s measure of present conditions increased to 45 from 38.8 in January. The measure of expectations for the next six months climbed to a one-year high of 88 from 76.7.
Today’s report parallels other data on consumer sentiment. The Bloomberg Consumer Comfort Index climbed to minus 38.4, the highest level this year, in the period ended Feb. 19. The Thomson Reuters/University of Michigan final index of consumer sentiment also rose to a 12-month high of 75.3 in February.
The percent of respondents in the Conference Board survey expecting more jobs to become available in the next six months increased to 18.7 from 16.4 the previous month. The proportion expecting their incomes to rise over the next six months climbed to 15.4 from 13.8 percent in January.
The share of consumers who said jobs are currently hard to get dropped to 38.7 percent, the lowest since November 2008.
Rising equity values are helping boost sentiment. The Dow Jones Industrial Average (INDU) today touched the highest level since May 2008.
“The trend has been improving for both U.S. consumer confidence and employment,” Jeffrey Lorberbaum, chairman and chief executive officer of carpet-maker Mohawk Industries Inc. (MHK), said during a Feb. 24 conference call. “Our long-term outlook supports a rebound from the low sales levels.”
At the same time, higher fuel costs threaten consumers’ incomes, reducing their ability to maintain current spending levels. A gallon of regular unleaded gasoline climbed to $3.72 yesterday from $3.28 at the end of 2011, according to AAA, the nation’s largest automobile association.
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