Consumer confidence rose in April to a nine-month high, showing Americans are growing more upbeat about the economy as the labor market gains traction.
The Thomson Reuters/University of Michigan final index of sentiment increased to 84.1 from a four-month low of 80 in March. The median projection in a Bloomberg survey of economists called for 83 after a preliminary April reading of 82.6.
Consumers were more optimistic about current conditions than at any time since July 2007 as smaller ranks of the unemployed, near-record stock prices and higher property values help bolster household finances. Further strides in the labor market that generate bigger wage gains would provide additional impetus for the consumer spending that makes up almost 70 percent of the economy.
“Things are getting better,” Michael Gapen, a senior U.S. economist at Barclays Plc in New York, said before the report. Some of the economy’s headwinds, such as inclement winter weather and last year’s government shutdown, “are starting to wane and people are looking toward some pocketbook issues.”
Estimates of the 63 economists in the Bloomberg survey ranged from 78.5 to 85. The index averaged 89 in the five years before December 2007, when the last recession began, and 64.2 in the 18-month contraction that followed.
The Michigan sentiment survey’s index of current conditions, which measures Americans’ views of their personal finances, advanced to 98.7 in April from 95.7 a month earlier. The initial April figure was 97.1.
The gauge of expectations six months from now increased to 74.7, the highest since July, from 70 last month. The preliminary April reading was 73.3.
Today’s data are in line with other readings on sentiment. The Bloomberg Consumer Comfort Index climbed last week to its highest level since August as Americans were more upbeat about being able to provide for their families than at any time in six years.
The Conference Board’s confidence index climbed in March to the highest level since 2008. The gauge is projected to rise further this month as well, according to the median in the Bloomberg survey ahead of the report’s release next week.
Gains in sentiment are translating into stronger sales. Cars and light trucks sold in March at a 16.3 million annualized rate, the fastest since May 2007, following a 15.3 million pace the prior month. Purchases at General Motors Co., Ford Motor Co., Toyota Motor Corp., Nissan Motor Co. and Chrysler Group LLC all topped analysts’ estimates.
“The economy is entering the second quarter on an improved trend,” Ellen Hughes-Cromwick, chief economist at Ford, said on an April 1 conference call. There are “some signs of improving wage and income gains. Very steady consumer confidence is also helping to be a support.”
More job opportunities are helping underpin sentiment. Payrolls climbed by 192,000 workers in March after a 197,000 increase the previous month that was larger than first estimated, the Labor Department said earlier this month. Private payrolls, which exclude those at government agencies, exceeded the pre-recession peak for the first time.
Fewer Americans are also applying for unemployment benefits. The four-week moving average of jobless claims was 316,750 in the period ended April 19 compared with the prior week’s 312,000 that was the lowest since 2007, according to Labor Department data.
Wage gains have been slower to materialize. Average hourly earnings increased 2.1 percent in March from a year earlier, close to the 2 percent average since the last recession ended in June 2009.