Confidence among U.S. consumers rose more than forecast in January to the highest level in eight months as Americans became more optimistic about job prospects.
The Conference Board’s index of sentiment increased to 60.6 from a revised 53.3 the prior month that was higher than previously estimated, figures from the New York-based private research group showed today. Economists projected the January gauge would rise to 54, according to the median forecast in a Bloomberg News survey.
A pickup in optimism, an improving labor market and tax relief may combine to encourage consumers, whose spending accounts for about 70 percent of the economy. Federal Reserve Chairman Ben S. Bernanke said joblessness will still be slow to decline this year, indicating policy makers meeting today and tomorrow will stick to their plan for more stimulus.
“Confidence is going in the right direction,” Brian Jones, an economist at Societe Generale in New York, said before the report. “In general, the labor market is improving, and you need to have continued improvement there to keep consumer confidence rising.”
The share of Americans who said jobs were plentiful rose to the highest level since May 2009, while those expecting an increase in incomes climbed to an eight-month high. The Conference Board’s measure of present conditions rose to the highest since November 2008.
Stocks trimmed losses after the report and Treasuries were little changed. The Standard & Poor’s 500 Index declined 0.1 percent to 1,289.65 at 10:03 a.m. in New York. The yield on the benchmark 10-year Treasury note was 3.41 percent.
Estimates in the Bloomberg survey of 73 economists ranged from 50 to 57.3 after a previously reported 52.5 in December. The index averaged 96.8 during the last economic expansion that ended in December 2007.
The gain contrasts with the Thomson Reuters/University of Michigan preliminary consumer sentiment index, which fell this month as Americans worried that higher gasoline prices would hurt their finances.
Another report earlier today showed housing prices in November fell the most in a year, indicating housing has yet to join the U.S. economic rebound. The S&P/Case Shiller index of home values in 20 cities dropped 1.6 percent in November from a year earlier, the biggest 12-month decrease since December 2009, and declined 0.5 percent from October.
The Conference Board’s index of present conditions increased to 31 from a revised 24.9. The gauge of expectations for the next six months rose to 80.3 from 72.3.
The percent of respondents expecting more available in the next six months rose to 16 from 14.2 the previous month. The proportion who expect their incomes to rise over the next six months increased to 11.4, the highest since May, from 9.9 percent.
The share of consumers who said jobs are currently plentiful rose to 5.2 percent from 4.2 percent. Those who said jobs are hard to get decreased to 43.4 percent from 46.0 percent.
Confidence in all nine U.S. regions, led by a 21.3-point surge in the West South Central area, which includes Texas and Oklahoma.
Americans probably stepped up their purchases in the final three months of 2010. Consumer spending grew at a 4 percent annual pace, the fastest since the last quarter of 2006, according to the median estimate of economists surveyed by Bloomberg before the Commerce Department’s first estimate of fourth-quarter growth on Jan. 28.
Luxottica Group SpA, the owner of eyewear brands including Ray-Ban and Oakley, said yesterday fourth-quarter revenue climbed 16 percent on stronger sales in the U.S. and emerging markets. Sales at the Milan-based company’s Sunglass Hut stores open more than a year rose almost 13 percent in the quarter, led by an 18 percent increase in the U.S.
“The improving confidence of consumers” in the U.S. “allowed Luxottica to record excellent results,” the company said in a statement.
Luxottica expects “to post solid, stable growth and increased profitability” in 2011, Chief Executive Officer Andrea Guerra said in the statement. “The start of the new year already looks encouraging.”
At the same time, people are paying more at the pump, which may limit spending on other goods and services. The average price of a gallon of gasoline rose to $3.10 on Jan. 20, the highest since October 2008, according to AAA. Prices on regular- grade gasoline have exceeded $3 a gallon since Dec. 21.
Bernanke on Employment
While recent reports have pointed to a recovery in the labor market, Bernanke in Senate testimony on Jan. 7 said it may take five years for the labor market to “normalize fully.” Unemployment fell to 9.4 percent in December from 9.8 percent a month earlier as the U.S. added 103,000 jobs, according to Labor Department figures released Jan. 7.
President Barack Obama on Dec. 17 signed into law an $858 billion bill extending for two years tax cuts for all income levels. The measure also continues expanded jobless insurance benefits to the long-term unemployed for 13 months and reduces payroll taxes for workers by two percentage points this year.
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