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% of the economy.
“The labor market does seem to be gaining some traction so far in 2013,” Kevin Cummins, an economist at UBS Securities LLC in Stamford, Connecticut, said before the report. “House prices continue to recover and equity values continue to rise, at least on balance, ahead of the last couple days. That is adding important support to consumption.”
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.
The Michigan survey follows the weekly Bloomberg Consumer Comfort Index, 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.
“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% in May, higher than forecast and the biggest increase in three months, Commerce Department figures showed yesterday.
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% in the week ended June 13, has remained below 4% since the end of March 2012, Freddie Mac reported. It reached a record-low 3.31% 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% over the next 12 months, up from the May forecast of 3.1%. Over the next five years, Americans expect a 3% rate of inflation, an increase from the 2.9% projected last month.