Consumer confidence in U.S. unexpectedly climbed in August

Income Expectations

The share expecting incomes to increase in the next six months climbed to 17.4%, the highest since February 2011, from 15.7%.

“Consumers were moderately more upbeat about business, job and earning prospects,” Lynn Franco, director of economic indicators at the Conference Board, said in a statement. “Income expectations, which had declined sharply earlier this year with the payroll tax hike, have rebounded to their highest level in 2 1/2 years.”

While the labor market continues to improve, gains have been slow and uneven. Employers added 162,000 workers to their payrolls in July, the fewest in four months, the Labor Department reported earlier this month. Employment climbed by 197,500 a month on average in the first six months of this year, up from 180,000 in the second half of 2012.

The report follows the Thomson Reuters/University of Michigan final index of consumer sentiment which fell to 80 this month from 85.1. The Bloomberg Consumer Comfort Index dropped to minus 28.8 for the period ended Aug. 18 after decreasing to minus 26.6, the biggest two-week decline in a year.

Consumer Spending

Americans are still spending on big-ticket items such as appliances and cars even as they cut back on other purchases. Lowe’s and Home Depot Inc. reported stronger second-quarter results as shoppers, boosted by the housing recovery, snapped up home-improvement merchandise such as dishwashers, bathtubs and tile.

For retailers selling clothes and other general merchandise, the story is different. Wal-Mart Stores Inc., Target Corp., Foot Locker Inc. and some other merchants report that customers remain challenged financially and are spending cautiously.

“We continue to approach the economic and competitive environment with longer-term optimism but near-term caution,” said Kathee Tesija, executive vice president at Target, a discount retailer based in Minneapolis, Minnesota.

Lower Income

“While overall consumer confidence statistics have improved this year, it’s notable that optimism among lower- income households is lagging behind,” Tesija said on an Aug. 21 earnings call. “This year’s payroll tax increase and consumer spending on autos and housing are crowding out spending on other goods and services.”

Today’s figures showed that more consumers said they expected stock prices to increase in the next year, while more indicated interest rates would hold around current levels.

The data also showed the gains in confidence occurred among wealthier Americans, with sentiment jumping for those with incomes of $100,000 or more. Sentiment decreased among households earning less than $25,000 a year.

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