Improving US consumer sentiment and a big drawdown in wholesale inventories on Friday built on recent evidence that an economic recovery was picking up speed.
Shipping firm FedEx Corp added to the growing sense of economic recovery when it said profits would be higher than it had earlier expected, citing an improving economy and fuel prices.
The Reuters/University of Michigan Surveys of Consumers said the preliminary reading of its consumer confidence index for this month rose to 70.2, the highest since June, from 65.7 last month. This was above economists’ median expectation of a reading of 67.3, a Reuters poll showed.
SURPRISE
“It’s not really a surprise given the gains in stocks that we’ve seen and the data pointing more toward a recovery in hand,” said Kim Rupert, managing director of global fixed income analysis at Action Economics LLC in San Francisco.
Inventories at US wholesalers in July fell to their lowest level in nearly three years, declining for the 11th straight month after sharp drops in furniture and metals stocks, government data showed, suggesting consumer demand was reviving.
The US Commerce Department said total wholesale inventories dropped 1.4 percent to US$387.2 billion, the lowest level since September 2006, after a revised 2.1 percent decline in June. Economists had expected a 1.0 percent drop in July from June.
DEFICIT
The US government has pumped billions of dollars into the economy to help lift it from the worst downturn in decades at the same time as tax receipts have fallen considerably, leading to record deficits that have many worried about the country’s long-term fiscal health.
Last month’s budget deficit of US$111.40 billion, while far smaller than the US$152 billion gap forecast by economists, marked a record-matching 11 straight months of deficits.
A decline in outlays last month compared with a year earlier was partly due to calendar issues, which led some federal benefit payments to be shifted to July. Last month’s receipts also shrank, but at a slower pace than for the full fiscal year to date.
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