Consumer confidence climbed in September to a 14-month high as Americans’ outlooks for the economy improved.
The Thomson Reuters/University of Michigan final index of sentiment increased to 84.6, the same as the preliminary reading, from 82.5 in August. The median projection in a Bloomberg survey of economists called for 84.8.
Employment growth at the strongest pace in 15 years is helping brighten moods, while cheaper prices at the gas pump are making it easier on household budgets. Faster wage increases and more broad-based improvement in employment would help provide an additional boost for sentiment and spark bigger gains in the consumer purchases that make up about 70 percent of the economy.
“The consumer has hardly looked better this cycle,” said Jacob Oubina, senior U.S. economist at RBC Capital Markets LLC in New York. “Job growth, income growth and a sharp decline in gasoline prices over the last few months will conspire to keep a pretty decent underpinning on consumer confidence.”
In another report this morning, the world’s largest economy expanded faster than previously forecast in the second quarter, according to the Commerce Department’s third and final reading. Gross domestic product rose at a 4.6 percent annualized rate in the three months ended in June, up from a prior estimate of 4.2 percent. It was the strongest pace since the final three months of 2011.
Estimates of the 59 economists in the Bloomberg survey for the sentiment measure ranged from 83 to 86.5. 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 expectations six months from now increased to 75.4 in September from 71.3 last month. The preliminary reading was 75.6.
The gauge of current conditions, which measures Americans’ views of their personal finances, fell to 98.9 in September from a seven-year high of 99.8 a month earlier. The preliminary September reading was 98.5.
Other recent measures of sentiment have given mixed signals. The Bloomberg Consumer Comfort Index fell to an almost four-month low in the week ended Sept. 21 as Americans’ views of the economy and their finances deteriorated.
The Conference Board’s confidence index unexpectedly climbed in August to the highest level in almost seven years as consumers’ judgment of present conditions rose to its highest since February 2008. Expectations for the next six months fell.
The group’s September index probably will hold near the seven-year high, according to the median estimate in the Bloomberg survey of economists before the Sept. 30 release.
With firings hovering near decade lows and payrolls on track for their best year of growth since 1999, labor market gains are helping to lift Americans’ spirits. Jobless claims climbed a less-than-forecast 12,000 to 293,000 in the week ended Sept. 20, the Labor Department reported yesterday. Filings reached a 14-year low of 279,000 in mid-July and are now showing a four-week moving average of 298,500.
Beyond muted firings, sustained demand may help convince employers to add to headcounts. Employers have added an average 215,380 to payrolls a month so far this year, the strongest pace since 1999. Economists project an average of 216,000 this year, according to the median in a Bloomberg survey conducted Sept. 5- 10. The Labor Department will release September payrolls figures on Oct. 3.
Fuel prices hovering near seven-month lows are providing relief to consumers. The average price of a gallon of regular gasoline was $3.34 as of yesterday, the cheapest since mid- February.
Further gains in stock prices are helping to bolster household balance sheets. The Standard & Poor’s 500 Index reached a record high on Sept. 18 and has climbed 6.7 percent since the start of the year.
An incomplete jobs recovery is encouraging Fed policy makers to hold interest rates at record lows even as they plan to end the unprecedented monthly asset purchase program in October.
Only a third of labor market indicators that Fed Chair Janet Yellen has said she monitors to judge labor market health have returned to pre-recession strength. An elevated level of underemployment, decades-low workforce participation and a still-weak number of workers secure enough to quit their jobs are among gauges that remain below 2004-07 averages.
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