Consumer Confidence Advances to Second-Highest Since 2008

Photographer: Craig Warga/Bloomberg

A woman carries a shopping bag on a crowded street in New York on May 19, 2014. Close

A woman carries a shopping bag on a crowded street in New York on May 19, 2014.

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Photographer: Craig Warga/Bloomberg

A woman carries a shopping bag on a crowded street in New York on May 19, 2014.

Confidence among U.S. consumers rose in May to the second-highest level since 2008 as Americans grew more upbeat about the economy and labor market.

The Conference Board’s index climbed to 83 from 81.7 a month earlier that was weaker than initially estimated, the New York-based private research group said today. The reading matched the median forecast in a Bloomberg survey of 62 economists.

Higher stock prices and home values are underpinning sentiment for some Americans. A broadening of the pickup in employment that leads to stronger wage gains would help to further boost sentiment and propel the consumer spending that accounts for almost 70 percent of the economy.

“Rising home prices certainly are making households feel better, and higher net wealth with rising equity portfolios, those things are helping households feel healthier,” said Joe LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York, who correctly predicted the confidence reading. What’s more, “the labor market is better.”

The Standard & Poor’s 500 Index climbed to an all-time high as the report and figures on durable-goods orders boosted optimism on the economy. The S&P 500 advanced 0.5 percent to 1,910.57 at 10:43 a.m. in New York.

Estimates of consumer sentiment ranged from 71.5 to 85.1 in the Bloomberg survey after a previously reported March reading of 82.3. The Conference Board’s measure averaged 53.7 in the recession that ended in June 2009.

The figures stand in contrast to other readings on sentiment. The Thomson Reuters/University of Michigan index unexpectedly fell in May from a nine-month high. The preliminary reading dropped to 81.8 from 84.1 in April, the group said May 16.

Bloomberg Measure

Americans’ expectations for the economy deteriorated to a seven-month low in May, a sign that the rebound from weakness earlier this year may be limited by still-cautious consumers. An expectations gauge that tracks where the economy is heading declined to 42.5 in May from 48 in the month prior, data from the Bloomberg Consumer Comfort Index showed May 22.

Among other reports today, home prices cooled in March. The S&P/Case-Shiller index of property prices in 20 U.S. cities increased 12.4 percent from March 2013 after a 12.9 percent gain in the year ended in February, a report from the group showed in New York.

Durable Goods

Orders for durable goods unexpectedly rose in April, led by demand for military equipment. Bookings for goods meant to last at least three years advanced 0.8 percent after a 3.6 percent gain in the prior month that was stronger than previously reported, Commerce Department figures showed.

The Conference Board’s gauge of present conditions rose to 80.4 after 78.5 in April. The barometer of consumer expectations for the next six months advanced to 84.8 from 83.9 a month earlier.

“Expectations regarding the short-term outlook for the economy, jobs and personal finances were also more upbeat,” Lynn Franco, director of economic indicators at the Conference Board, said in a statement.

The share of respondents who said they expected their incomes to rise climbed to 18.3 percent in May, the highest since the end of 2007, from 16.8 percent a month earlier. More also expected their incomes to decline. The proportion of Americans who said jobs would become more plentiful in the next six months rose to 15.4 percent, the highest this year, from 14.7 percent.

Buying Plans

More Americans indicated in today’s confidence survey that they plan to buy automobiles in the next six months, while fewer looked to purchase homes.

The consumer is facing some headwinds. A gallon of unleaded gas at the pump cost $3.66 on May 22, up from $3.18 in November, based on data from motoring group AAA.

Food costs climbed 0.4 percent for a third consecutive month in April, data from the Labor Department showed May 15. The cost of meat increased 2.9 percent, the most since November 2003. The jump in pork was the biggest since July 1986.

“The modern consumer’s having a tough time,” Michael Balmuth, chief executive officer of Pleasanton, California-based Ross Stores Inc., said in a May 22 conference call. “As you look out around and hear other people report, I think it’s pretty tough business out there.”

Dollar Tree Inc., based in Chesapeake, Virginia, is also seeing the effects of cuts to food stamps and a still-elevated jobless rate.

Labor Market

“The low middle and the lowest have especially been pressured,” Bob Sasser, chief executive officer, said in a May 22 earnings call. “The unemployment issue still remains high. There is always concern about how long the benefits are going to last until I get a job. So it’s a worried and concerned consumer.”

Still, a faster pace of hiring and stronger income gains could boost sentiment. Payrolls climbed by 288,000 workers in April after a 203,000 increase the previous month, the Labor Department said earlier this month. The unemployment rate fell to 6.3 percent, the lowest since 2008, from 6.7 percent in March.

The housing market is showing signs of stabilizing, which could make homeowners more content. Sales of new homes climbed in April for the first time this year, posting a 6.4 percent increase to a 433,000 annualized rate that was the biggest in six months and followed a 6.9 percent March decline, Commerce Department data showed last week.

To contact the reporter on this story: Jeanna Smialek in Washington at jsmialek1@bloomberg.net

To contact the editor responsible for this story: Carlos Torres at ctorres2@bloomberg.net Vince Golle, Mark Rohner

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