Confidence among U.S. consumers soared in July to the highest level in almost seven years as Americans grew more upbeat about the labor market and the outlook for the economy.
The Conference Board’s index rose to 90.9, the highest since October 2007, from a revised 86.4 in June, according to the New York-based private research group said today. The gauge exceeded the most optimistic forecast in a Bloomberg survey in which the median called for an 85.4 reading.
More employment opportunities, fewer firings and resilient equity markets are buoying spirits against a backdrop of geopolitical tension in Ukraine and the Middle East. Faster wage growth would help to further spur sentiment and provide the wherewithal for bigger gains in consumer spending.
“Stronger job growth helped boost consumers’ assessment of current conditions, while brighter short-term outlooks for the economy and jobs, and to a lesser extent personal income, drove the gain in expectations,” Lynn Franco, director of economic indicators at the Conference Board, said in a statement. The figures “suggest the recent strengthening in growth is likely to continue into the second half of this year.”
Estimates of the 75 economists in the Bloomberg survey ranged from 82.8 to 88.5 after a previously reported 85.2 reading in June.
Stocks extended gains after the report, with the Standard & Poor’s 500 Index advancing 0.3 % to 1,984.04 at 10:29 a.m. in New York.
Another report today showed home prices rose in the 12 months ended in May at the slowest pace in more than a year as a lull in the housing market limited appreciation. The S&P/Case- Shiller index of property prices in 20 U.S. cities increased 9.3% from May 2013 after a 10.8% gain in the year ended in April. Compared with the prior month, home prices fell for the first time in two years.
The Conference Board’s gauge of present conditions rose to 88.3, the strongest reading since March 2008, from 86.3 in June. The barometer of consumer expectations for the next six months increased to 92.7, the highest since February 2011, from 86.4 a month earlier.
The share of Americans who said jobs were currently plentiful advanced to 15.9 % in July, the highest since May 2008, from 14.6%. More consumers than a month earlier said they expected greater employment opportunities and better business conditions in the six months ahead.
Payrolls surged 288,000 in June after a 224,000 gain the prior month that was bigger than previously estimated, figures from the Labor Department showed this month. The unemployment rate dropped to an almost six-year low of 6.1 %.
More employment opportunities will probably keep Federal Reserve policy makers on the path to reduce monetary stimulus as they begin a two-day meeting today.
The share of respondents in the Conference Board’s survey that said they expected their incomes to rise in the next half year rose to 17.3 % in July from 16.7 % a month earlier.
The increase in sentiment, however, didn’t translate into buying plans. Fewer respondents in the survey said they expected to purchase cars, homes and appliances in the next six months.
Some of the headwinds consumers have faced in recent months are starting to dissipate. A gallon of unleaded gasoline at the pump fell to $3.52 yesterday, the lowest since mid-March, after a high in April of $3.70, according to data from AAA, the largest U.S. motoring group.
Food costs showed signs of stabilizing in June after surging in prior months as a drought in the West and a deadly hog virus pushed up prices for beef, pork and some vegetables and fruits. Food prices rose 0.1 % in June after a 1.1 % surge a month earlier, according to Labor Department figures. They were up 2.4 % from June 2013.
Progress in the labor market is keeping O’Reilly Automotive Inc. upbeat even as the second-largest U.S. auto parts retailer says challenges remain for some of its customers.
“We were encouraged by modest gains in miles driven, as unemployment very gradually improves,” Gregory Henslee, the Springfield, Missouri-based company’s chief executive officer, said on a July 24 earnings call. Even so, “our average consumer has been under pressure for a long time as a result of the slow recovery and we would not anticipate this pressure to significantly abate in the near term.”