Consumer confidence unexpectedly climbed in March to the highest level in six years, propelled by improved optimism about the economy’s prospects, signaling growth will strengthen after a weather-related slowdown.
The Conference Board’s sentiment index rose to 82.3, the highest since January 2008, exceeding all forecasts in a Bloomberg survey of economists, from 78.3 in February, the New York-based private research group said today. Other figures showed the housing market was having trouble gaining traction, in part because of harsh winter weather earlier this year.
“Signs of spring might be evident and might be getting people a little more optimistic that the future is going to be better,” said Joe LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York. As “these weather effects dissipate and we get payback, you’ll see confidence improve even more.”
More Americans this month held out hope that employment opportunities will improve as the world’s largest economy gains momentum, which boosts the odds that spending will pick up. That would help companies such as General Mills Inc. recover after the frigid winter hurt sales at the start of the year.
“Consumers spend based on their expectations and not based on their current levels of income, and consumer expectations were at a very healthy level this month,” said Guy LeBas, managing director of fixed income strategy at Janney Montgomery Scott LLC in Philadelphia.
Stocks rose for the first time in three days, with the Standard & Poor’s 500 Index climbing 0.3 percent to 1,862.74 at 12:53 p.m. in New York.
Sentiment elsewhere wasn’t as buoyant. German business confidence fell in March for the first time in five months as companies assess the risks to trade from escalating European Union sanctions against Russia. The Ifo institute’s business climate index, based on a survey of 7,000 executives, fell to 110.7 after reaching 111.3 the prior month, the highest level since July 2011.
Snowstorms and colder temperatures in the first two months of the year coupled with higher mortgage rates, more expensive properties and a lack of supply restrained the U.S. housing market. Sales of new homes dropped 3.3 percent to a 440,000 annualized pace in February, the weakest in five months, the Commerce Department said today.
Another report from S&P/Case-Shiller showed home values in 20 cities advanced in the year to January at the slowest pace since August. Prices climbed 13.2 percent from January 2013 after rising 13.4 percent in the 12 months ended in December.
An acceleration in prices since the end of 2012 has generated more profit for companies such as Lennar Corp. and KB Home. Miami-based Lennar, the biggest homebuilder by market value, reported net income rose to $78.1 million in the three months through February from $57.5 million a year earlier, the company reported March 20.
“In the first quarter, we have seen clear signs that volume is returning to the market even as severe weather made conditions difficult,” Stuart Miller, Lennar’s chief executive officer, said on a conference call. “We continue to believe that the fundamental drivers of improvement in the housing market remain a steadily improving economy with a slowly improving employment picture unlocking pent-up demand, while supplies remain constrained to meet that demand.”
Los Angeles-based KB Home also reported fiscal first- quarter earnings that beat estimates as it raised prices and opened communities in high-cost, land-constrained markets, such as parts of California.