Consumers to factories point to durable U.S. expansion

Housing Outlook

The demand for housing is driving residential construction and aiding the economic expansion. Consumers who long held off on purchases are entering the market even as borrowing costs rise, encouraged by the increases in property values and gains in employment.

“The housing recovery is alive and well and has a long way to go, and higher rates aren’t going to choke it off,” said Joe LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York, who projected a gain to 475,000, matching the highest in the Bloomberg survey. “It’s given the economy, or will give the economy, a lot of oomph.”

Americans are gaining confidence as their biggest asset, a house, becomes more valuable. The New York-based Conference Board’s consumer sentiment index increased to 81.4 in June from 74.3 a month earlier, data from the private research group showed.

Other Measures

Today’s figures are in line with the Bloomberg Consumer Comfort Index, 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.

Spirits are lifting as employment picks up. The Conference Board’s survey showed more consumers thought opportunities will open up in the next six months and an increasing share said jobs were plentiful right now.

Houses aren’t the only thing consumers are more willing to buy as prospects improve. Cars and light trucks sold at a 15.2 million annualized rate in May, putting 2013 on course to be the best year for automakers since 2007, according to industry figures.

The gains in spending, which account for 70% of the economy, are helping to bolster the expansion after government budget cuts took effect in March.

“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. 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.”

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