WASHINGTON: Consumer confidence in the US rose in February to a three-month high, which may help to preserve recent gains in household spending.
The Thomson Reuters/University of Michigan preliminary index of consumer sentiment climbed to 76.3 this month from 73.8 in January. The gauge was projected to rise to 74.8, according to the median forecast in a Bloomberg survey.
Increased property values, a strengthening job market and stocks at five-year highs are providing a boost to Americans’ balance sheets. A pickup in wealth would help make up for recent gains in gasoline prices and the hit to take-home pay from a two per centage-point increase in the payroll tax.
“There has been a reasonably solid pace in job growth, and unemployment has been coming down,” Jim O’Sullivan, chief US economist at High Frequency Economics in Valhalla, New York, said before the report. O’Sullivan is the best forecaster of the sentiment gauge in the last two years, according to data compiled by Bloomberg. “Confidence is more likely to rise than fall over the next few months.”
Other figures showed manufacturing is on the mend. The Federal Reserve Bank of New York said its general economic index climbed to 10 in February, the highest since May, from minus 7.8 in the prior month. Readings greater than zero signal expansion in New York, northern New Jersey and southern Connecticut.
Estimates of the 65 economists surveyed by Bloomberg ranged from 70 to 78. The index averaged 64.2 during the last recession, and 89 in the five years before the 18-month economic slump that ended in June 2009.
The report is in line with Bloomberg’s weekly Consumer Comfort Index, which climbed to minus 35.9 in the period ended Feb.10 from minus 36.3 the prior week.
The Michigan survey’s index of current conditions, which assesses how Americans perceive their financial situation and whether they think it is a good time to buy expensive items like cars, rose to 88 from a six-month low of 85 in January.
The index of consumer expectations for six months from now, which more closely projects the direction of consumer spending, advanced to 68.7 from 66.6 last month.
Consumers in preliminary confidence report said they expect an inflation rate of 3.3 per cent over the next 12 months, the same as in January. Over the next five years, Americans expected a 3 per cent rate of inflation, compared with 2.9 per cent in the previous month.
Americans are benefiting from rising house values as low mortgage rates drive the recovery in housing. Prices for single-family homes climbed in about 88 per cent of US cities in the fourth quarter, the National Association of Realtors said in a report earlier this week.