Confidence among U.S. consumers climbed in June to the highest level in more than five years, an indication spending will probably accelerate after cooling this quarter.
The Conference Board’s index rose to 81.4, exceeding all forecasts in a Bloomberg survey and the highest since January 2008, from a revised 74.3 in May, data from the New York-based private research group showed today. The median forecast of 77 economists surveyed by Bloomberg called for a reading of 75.1.
Rising residential property values and stock prices, combined with gains in employment, have spurred demand for housing and automobiles as households gain confidence the expansion will be sustained. Nonetheless, the recent slump in shares and surge in interest rates pose a risk to sentiment should hiring also suffer.
“Unambiguously, the economy is showing signs of improvement despite sizable fiscal drag,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics in Valhalla, New York, who is the top-ranked forecaster of confidence in the past two years, according to data compiled by Bloomberg. Among the positives “has been the improving labor market, but in addition, wealth in general has been rising, at least up until the last week.”
Forecasts in the Bloomberg survey of economists ranged from 72 to 79.5 after a previously reported 76.2 in May. The measure averaged 53.7 in the recession that ended in June 2009.
The Conference Board said the cutoff day for responses to be included in the report was June 13. Since then equities have declined.
Stocks held gains after the figures, with the Standard & Poor’s 500 Index rebounding from a nine-week low. The S&P 500 rose 0.9 percent to 1,586.91 at 11:08 a.m. in New York.
Other figures today showed home prices, new-home sales and durable goods orders climbed more than forecast.
The S&P/Case-Shiller index of property values increased 12.1 percent the 12 months ended in April, the biggest year-over-year gain since March 2006, after advancing 10.9 percent a month earlier. The median forecast in a Bloomberg survey of 28 economists called for a 10.6 percent advance.
Sales of new homes rose to the highest level in almost five years, the Commerce Department said. Purchases increased 2.1 percent to an annualized pace of 476,000 homes, exceeding all estimates in a Bloomberg survey and the most since July 2008.
Bookings (DGNOCHNG) for goods meant to last at least three years increased 3.6 percent for a second month in May, according to the Commerce Department. Economists estimated a 3 percent gain, according to the Bloomberg survey median. Demand excluding transportation equipment, which is volatile month to month, rose 0.7 percent, also topping projections.
The Conference Board’s gauge of consumer present conditions rose to 69.2 in June, the highest in five years, from 64.8 in May. The measure of expectations for the next six months climbed to 89.5 this month, the strongest reading since February 2011, from 80.6.
Today’s figures are in line with the Bloomberg Consumer Comfort Index (COMFCOMF), which has been hovering around a five-year high reached in late April. American households last week were the least pessimistic about the current state of the economy in more than five years, the Bloomberg index showed.
The share of consumers expecting more jobs to open up in the next six months climbed to an eight-month high of 19.6 percent in June from 16.3 percent in May.
The number of respondents who said jobs are currently plentiful increased to 11.7 percent in June, the highest since September 2008, from 9.9 percent.
Those expecting business conditions to improve in the next six months rose to a seven-month high of 20.3 percent in June from 18.7 percent the prior month.
“Consumers are considerably more positive about current business and labor market conditions than they were at the beginning of the year,” Lynn Franco, director of economic indicators at the Conference Board, said in a statement. “Expectations have also improved considerably over the past several months, suggesting that the pace of growth is unlikely to slow in the short-term, and may even moderately pick up.”
The Kroger Co. (KR:US), a supermarket and convenience store chain based in Cincinnati, says it’s keeping an eye on how the economy, gas prices, taxes and political uncertainty affect consumer optimism.
“While there are signs of a better economy, the improvement is not robust,” said David B. Dillon, the chairman and chief executive officer in a June 20 earnings call. “Consumer sentiment is gradually improving, but remains fragile. We continue to see high variability in sales comparisons between days and weeks.”
Household spending in the first quarter increased at a 3.4 percent annualized rate, the biggest gain since the fourth quarter of 2010, Commerce Department figures showed May 30. That helped gross domestic product grow at a 2.4 percent during the three months.
The economy is projected to expand at a 1.7 percent annual rate in the second quarter, based on the median forecast in a Bloomberg economist survey from June 7 to June 12. Consumer spending is projected to grow at a 1.9 percent pace, based on the survey median.
To contact the reporter on this story: Alexandria Baca in Washington at Abaca3@bloomberg.net
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