US consumer confidence hits nine-month high
US consumer confidence rose in June to its highest level in nine months as a recent stock market rally and signs of economic stability have begun to peel away some of gloom cast by the recession.
In its June preliminary report the Reuters/University of Michigan consumer survey rose to 69 from 68.7 in May. It was the fourth consecutive monthly increase but slightly trailed economists’ expectations.
The monthly rise was fuelled by sharp boost in feelings about current economic conditions, which rose on the 74.5 on the index from 67.7, as job losses have moderated and housing prices have flattened or risen in some regions.
“The apocalyptic tone to public discourse on the economy is continuing to abate,” said Mike Englund, an economist at Action Economics.
During the latest cycle consumer confidence bottomed last November at 55.3 on the Reuters/University of Michigan index. It hit a record low of 51.7 in 1980.
Some of the June increase was blunted by a drop in the economic outlook, which fell from 69.4 to 65.4 on fears that rising petrol prices could squeeze US consumers’ already diminished spending power. The price of petrol rose by 10 per cent in the US in May and is already up by 15 per cent in June, according to Capital Economics.
The Federal Reserve said on Thursday that the net worth of US households plunged by $1,300bn during the first three months of the year. Falling home prices and rising job cuts have sapped 2.5 per cent of household wealth in America in the first quarter, leaving it at $50,400bn. Last year’s 18 per cent drop was the worst since the Fed began tracking in 1946.
Rising oil prices, which climbed to an eight-month high of $73 a barrel on Thursday, have also raised expectations for inflation. Consumers are expecting prices to rise by 3.1 per cent this year, which is near the Federal Reserve’s target and should ease earlier fears of a deflationary trap of falling prices.
Consumer sentiment is a closely watched gauge of future consumer spending. On Thursday the commerce department revealed that retail sales last month showed their biggest monthly increase since January thanks to higher sales at petrol stations and more demand for apparel and cars.