Consumer confidence in U.S. unexpectedly climbed in August

Confidence among U.S. consumers unexpectedly increased in August as Americans grew more optimistic about the prospects for the world’s largest economy.

The Conference Board’s index of sentiment advanced to 81.5 from a revised 81 the prior month that was stronger than initially estimated, the New York-based private research group reported today. The median forecast in a Bloomberg survey of economists was 79.

Sustained job growth and increased wealth tied to higher home values and stock portfolios are helping to sustain the household spending, boosting automakers and home-improvement retailers such as Lowe’s Cos. Today’s report showed more Americans expected a pickup in employment opportunities and income gains in the next six months.

“The household sector is still improving and a lot of that improvement comes from home prices,” said Sam Coffin, an economist at UBS Securities LLC in Stamford, Connecticut. UBS Securities is the top forecaster of the Conference Board’s index in the last two years, according to data compiled by Bloomberg.

Estimates for consumer confidence ranged from 74.3 to 82 in the Bloomberg survey of 71 economists after an initial July reading of 80.3. The measure averaged 53.7 during the recession that ended in June 2009. The cutoff date for the Conference Board’s survey was Aug. 15.

Stocks held losses on growing tension over possible military action in Syria. The Standard & Poor’s 500 Index dropped 0.8% to 1,643.03 at 10:13 a.m. in New York.

Home Prices

Another report today showed home prices increased at a slower pace in June. The S&P/Case-Shiller index of property values advanced 12.1% from the same month in 2012 after rising 12.2% in the year ended in May, the biggest gain since March 2006.

The Conference Board’s measure of expectations for the next six months rose to 88.7 from 86. The gauge of present conditions decreased to 70.7 this month from 73.6 in July.

The share of Americans expecting business conditions to improve rose to 20.1% this month from 19.9%.

The% of respondents expecting jobs to become more available in the next six months climbed to 17.6 from 16.7.

The share of those who say jobs are currently hard to get decreased to 33%, the lowest since September 2008, from 35.2%. The difference in the shares of those saying employment opportunities are currently plentiful and people indicating positions are hard to get was the narrowest since September 2008.

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.

www.bloomberg.com

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