Consumer sentiment up to highest level since January

29 Jun 2015 | Author: | No comments yet »

Consumer Sentiment at Highest Level Since January.

Consumer sentiment rose this month to the highest level since January, suggesting that spending would strengthen this year. The University of Michigan’s final index of sentiment increased to 96.1 in June, exceeding all estimates in a Bloomberg survey of economists, from a 90.7 May reading. Consumers’ views of the buying climate from January through June were the brightest since 2007 as job and income growth and stock-market gains led to more upbeat assessments about finances. The consumer-sentiment gauge averaged 86.9 over the year leading up to the recession. “Consumers voiced in the first half of 2015 the largest and most sustained increase in economic optimism since 2004,” according to the report, which noted an improvement for households throughout the income distribution. “The economic slowdown has ended according to consumers.” Economists follow readings on confidence to look for clues about consumer spending, the backbone of the economy. The figures point to a stronger push for the economy as shoppers embrace cheaper merchandise as well as low interest rates for bigger purchases. “Consumers are in a fairly buoyant mood, and we see that being translated into spending activity,” said Millan Mulraine, deputy head of U.S. research and strategy at TD Securities LLC in New York, whose projection for a 95.2 reading was among the closest in the Bloomberg survey. “We’re not only headed in the right direction, but we seem to be moving in that direction at an accelerated pace.” The June sentiment index was the second-highest since January 2007, and the 5.4 point increase from May was the largest since December 2013.

For the first six months of 2015, consumer optimism improved at the fastest pace since 2004, three years before the recession, said Richard Curtin, chief economist for the Michigan survey. A gauge of consumers’ views on current conditions rose to 108.9 in June from 100.8 in May, while a barometer of their expectations increased to 87.8 from 84.2. Employers have been adding jobs — nearly 3.1 million over the last year — at a pace not seen since the boom years of the late 1990s. “After a soft start to the year, we expect the economy to find its footing in the coming months with stronger consumer spending seen to be a key driver of accelerating growth,” Gregory Daco, head of United States macroeconomics at Oxford Economics, wrote in a research note.

Further, some jobless workers continue to face a particularly harsh labor market — almost three-in-10 unemployed people have been looking for a new spot for at least half a year. Also, workers without permanent jobs have seen their share of the total labor force grow in recent years, a trend that cuts families’ financial stability. The Michigan report corroborates the Bloomberg Consumer Comfort Index, which saw a turnaround in sentiment in the past two weeks after dropping almost 8 points from an eight-year high in mid-April. And the rebounding housing market hasn’t helped everyone — there are still pools of deeply distressed borrowers who are struggling to pay their monthly bills.

He said he projects outlays to grow 3 percent this year, which means they will grow even faster than that in the second half of the year in order to meet his forecast.

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