Bloomberg News

Consumer Sentiment in U.S. Fell in June From Six-Year High (2)

June 14, 2013

Michigan Consumer Sentiment Index Decreased to 82.7 From 84.5

People stand outside a store at The Shops at Columbus Circle mall in New York. Photographer: Victor J. Blue/Bloomberg

Consumer confidence in June eased from a six-year high as progress in the labor market supported Americans’ views of the economic outlook.

The Thomson Reuters/University of Michigan preliminary index of consumer sentiment declined to 82.7 in June from 84.5 the prior month that was the highest since July 2007, a report today showed. The median forecast in a Bloomberg survey was unchanged at 84.5.

Steady hiring gains coupled with rising equity prices and property values are underpinning Americans’ confidence. Further improvement from the 175,000 jobs added last month may be needed to help accelerate the consumer purchases that make up about 70 percent of the economy.

“The stock market peaked in late May, so you may be seeing some of that being reflected in the number,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York, who projected a drop in the gauge to 82.5. “In general, the consumer is in a relatively good position.”

Forecasts in the Bloomberg survey ranged from 82 to 89. The index averaged 64.2 during the recession that ended in June 2009 and 89 in the five years prior.

Bloomberg Comfort

The Michigan survey follows the weekly Bloomberg Consumer Comfort Index (COMFCOMF), released yesterday, which slipped to minus 31.3 for the period ended June 9, a two-month low, from minus 29.7. It reached a five-year high of minus 28.9 in late April.

The decline in the Michigan survey this month was centered in the current conditions index, which takes stock of Americans’ views of their personal finances. The measure dropped to 92.1 from 98 in May, which was the highest since August 2007.

The index of expectations six months from now climbed to 76.7 this month, the highest since November, from 75.8 in May.

Steady job gains and lower borrowing costs may be lifting Americans’ spirits and encouraging them to spend, benefiting retailers such as St. Paul, Minnesota-based 3M Co. (MMM:US)

“We do expect some modest improvement as we go through the year based on a view that the economy is going to continuously show some improving resilience,” David Meline, chief financial officer at 3M, said at a June 12 conference.

Retail sales rose 0.6 percent in May, higher than forecast and the biggest increase in three months, Commerce Department figures showed yesterday.

Payroll Gain

Employers added 175,000 jobs last month, the Labor Department said last week. Hiring gains averaged 189,200 in the first five months this year compared to 182,750 in all of 2012.

The labor market gains haven’t been enough to convince Federal Reserve officials to alter accommodative monetary policy, which is helping keep interest rates low and attracting buyers of big purchases such as autos and homes.

The rate on a 30-year fixed home loan, while rising for a sixth period to 3.98 percent in the week ended June 13, has remained below 4 percent since the end of March 2012, Freddie Mac reported. It reached a record-low 3.31 percent in late November, according to the figures that date to 1972.

Consumers surveyed for today’s confidence report expect an inflation rate of 3.2 percent over the next 12 months, up from the May forecast of 3.1 percent. Over the next five years, Americans expect a 3 percent rate of inflation, an increase from the 2.9 percent projected last month.

To contact the reporter on this story: Michelle Jamrisko in Washington at mjamrisko@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net


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