Confidence among US consumers rose more than forecast this month, reaching a one-year high as Americans grew more upbeat about the outlook for the economy.
The Thomson Reuters/University of Michigan final index of consumer sentiment increased to 75.3 this month from 75 last month. The median estimate in a Bloomberg News survey called for 73, after a preliminary reading of 72.5. New-home sales last month were stronger than projected, another report showed.
Three straight months of faster job growth along with a stock market rally since late last year are helping keep Americans optimistic in the face of rising gasoline prices. Further gains in confidence might sustain the household spending that accounts for about 70 percent of the economy.
“The overwhelming fact is that the job market has gotten better,” said John Hancock -Financial -Services chief economist Bill Cheney, who projected a gain. “People are back to spending most of the additional income that they get, so as employment increases and you get some meager increases in wages, they do feed through to more spending.”
The Standard & Poor’s 500 Index rose to its highest level since June 2008, climbing 0.2 percent to 1,365.74 at the close of trading in New York. The yield on the benchmark 10-year Treasury note fell to 1.98 percent from 2 percent late on Friday.
Purchases of new homes declined 0.9 percent last month to a 321,000 annual rate from a 324,000 pace in December that was stronger than previously reported, US Commerce Department figures showed. The median estimate in a Bloomberg survey called for 315,000 pace last month.
The Michigan survey’s index of consumer expectations for six months from now, which more closely projects the direction of consumer spending, rose to a one-year high of 70.3 this month from 69.1 last month.
The gauge of current conditions, which reflects Americans’ perceptions of their financial situation and whether they consider it a good time to buy big-ticket items like cars, decreased to 83 from 84.2 the prior month.
Escalating fuel costs still pose a risk to sentiment as they eat into households’ incomes.
Regular unleaded gasoline climbed to US$0.96 a liter yesterday, the highest since Sept. 11 last year, from US$0.87 at the end of last year, according to AAA, the nation’s largest automobile association. Fuel prices dropped to a 10- month low of US$0.85 on Dec. 20.
“If the predictions come true that the gas gets to be close to US$5 [a gallon] this summer, that is not good for our business, that’s not good for the consumer, it takes away discretionary dollars,” said Mike Riccio, chief financial -officer at furniture maker La-Z-Boy Inc, during a conference call on Wednesday. “We got a mindful eye on that.”
Better job growth and reduced job cuts may provide an offset. The unemployment rate last month declined to 8.3 percent, the lowest since February 2009, while the economy generated 243,000 jobs, the most in nine months, US Labor Department data showed on Feb. 3.
Higher stock prices are making Americans feel wealthier. The Dow Jones Industrial Average rose above 13,000 this week for the first time since May 2008. The index gained 22 percent through Friday after a recent low on Oct. 3.
The nation’s housing market is stabilizing, US Commerce Department figures showed yesterday. The gain in last month’s sales brought the number of homes for sale to the lowest on record, signaling builders may not have to cut back much more.