Consumer confidence in the U.S. unexpectedly climbed in August to the highest level in almost seven years, reinforcing signs of a strengthening outlook for the second half of 2014.
The Conference Board’s sentiment gauge rose to 92.4, the highest since October 2007, from a revised 90.3 a month earlier, the New York-based private research group said today. The median forecast in a Bloomberg survey called for a decline to 89.
Americans are finding more reasons to be upbeat about their prospects for the rest of the year as recent reports pointed to a pickup in the job market and stock prices advanced to records. Stronger sentiment will also help underpin consumer spending, which makes up almost 70 percent of the economy.
“Consumer confidence can sustain these high levels and even build on it a little,” Jim O’Sullivan, chief U.S. economist at High Frequency Economics in Valhalla, New York, said before the report. “The key driver is the labor market, and the numbers there have been showing an improvement.”
Estimates of 71 economists in the Bloomberg survey ranged from 85 to 94 after a previously reported July reading of 90.9. The gauge averaged 96.8 during the last expansion and 53.7 during the 18-month recession that ended in June 2009.
The Conference Board’s barometer of present conditions increased to 94.6, the highest since February 2008, from July’s 87.9. A gauge of consumer expectations for the next six months declined to 90.9 from 91.9 a month earlier.
“Consumers were marginally less optimistic about the short-term outlook compared to July, primarily due to concerns about their earnings,” Lynn Franco, director of economic indicators at the Conference Board, said in a statement. “Overall, however, they remain quite positive about the short-term outlooks for the economy and labor market.”
Looking ahead, the proportion of Americans who said jobs would become more plentiful in the next six months fell to 17 percent from 18.7 percent in July. About 15.5 percent projected their incomes would increase over the period, the fewest since March.
Americans’ assessments of current labor-market conditions were more upbeat. The share of respondents who said jobs were currently plentiful climbed to 18.2 percent, the most since March 2008. The 2.6 point jump from the prior month was the biggest since January 2006. Those who said positions were hard to get decreased to 30.6, the fewest since July 2008.
Other confidence reports showed a pullback. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment dropped in August to a nine-month low. The weekly Bloomberg Consumer Comfort Index (COMFCOMF) cooled in the period ended Aug. 17 as Americans became less upbeat about the buying climate, and a measure tracking the economic outlook eased in August to a three-month low.
Households are gaining from an improving economy, driven by an employment outlook that continues to strengthen. Payrolls in July marked the sixth month of gains exceeding 200,000, the longest such stretch since 1997, according to the Labor Department.
Equity prices also are providing a boost to household finances. The Standard & Poor’s 500 Index, which reached an all-time high yesterday, has gained 8.1 percent this year.
Cheaper gasoline prices mean more relief for consumers’ wallets. A gallon of regular fuel at the pump cost $3.47 on average this month through Aug. 24, down from a 2014 high of $3.70 in April, based on data from AAA, the largest U.S. auto group.
At the same time, wages are lagging behind even as companies add workers. Inflation-adjusted weekly earnings were unchanged in the 12 months through July on average, according to Labor Department data.
Gap Inc. (GPS), the owner of chains including its namesake, Banana Republic and Old Navy, is among companies hoping to benefit from an improving environment for shoppers. The San Francisco-based retailer posted second-quarter profit that topped analysts’ estimates.
“The consumer is feeling slightly better, which we think is good for the overall industry,” Chief Executive Officer Glenn Murphy said on an Aug. 21 conference call with investors.
To contact the reporter on this story: Shobhana Chandra in Washington at firstname.lastname@example.org