Consumer Confidence in U.S. Increases to a Three-Month High

U.S. Home Prices Rise in November
  • Americans more upbeat about expectations for economy, jobs
  • Fewer expect stock prices to increase in next 12 months

Consumer confidence improved in January to a three-month high as Americans grew more upbeat about the prospects for the economy, labor market and their incomes.

The Conference Board’s index of sentiment advanced to 98.1 in January from a revised 96.3 a month earlier, the New York-based private research group said Tuesday. The median forecast of economists in a Bloomberg survey called for the measure to hold at the previously reported December reading of 96.5.

While a plunge in stock prices may have tempered views about current conditions, a resilient labor market, falling gas prices and low inflation overall are buoying views of the economic outlook. The pickup in sentiment extended to buying plans as a greater share of households said they intend to buy cars and appliances.

“All of the improvement was in expectations, which many people believe are a driver of big-ticket purchases," said Scott Brown, chief economist at Raymond James Financial Inc. in St. Petersburg, Florida. "You are looking at a better business outlook, a better outlook for household income. It was mostly positive across regions too, so it’s fairly broad-based."

Estimates in the Bloomberg survey ranged from 90 to 100. The Conference Board’s gauge averaged 98 in 2015.

The data are in line with the University of Michigan’s measure of sentiment. That gauge climbed in January to a seven-month high, according to its preliminary reading.

Home Prices

Another report on Tuesday showed home prices in 20 U.S. cities climbed in November from a year earlier by the most since July 2014. The S&P/Case-Shiller index of property values increased 5.8 percent from November 2014. Nationally, prices rose 5.3 percent year-over-year.

The Conference Board’s gauge of present conditions held steady in January at 116.4. The share of Americans who said business conditions were good was little changed at 27.2 percent versus 27.1 percent in December. Views of current labor-market conditions deteriorated, however. Some 22.8 percent of respondents said jobs were plentiful, down from 24.2 percent.

“Consumers’ assessment of current conditions held steady, while their expectations for the next six months improved moderately,” Lynn Franco, director of economic indicators at the Conference Board, said in a statement. “For now, consumers do not foresee the volatility in financial markets as having a negative impact on the economy.”

Improved Expectations

The index of consumer expectations for the next six months increased to a three-month high of 85.9 in January from 83. The report showed Americans’ assessments of future labor-market conditions improved.

The proportion of consumers expecting more jobs to become available in the next six months rose to 13.2 percent, also a three-month high, from 12.4 percent in December. The share of respondents that said they expected their incomes to grow in the next half year increased to 18.1 percent from 16.3 percent.

Respondents’ inflation expectations also eased in January to 4.8 percent, the lowest level since February 2007 and helped in part by tumbling prices at the gas pump.

Buying plans improved in January, with 12.2 percent saying they expected to purchase a motor vehicle, up from 11.3 percent a month earlier. The proportion planning to buy a major appliance also rose.

While the report shows most Americans largely dismissed recent turbulence in financial markets, confidence waned among upper-income individuals and the proportion of those expecting stocks to rise in the next year fell to the lowest level since the end of 2012. Shares in energy and raw materials producers have plunged on mounting concern about the global economy.

So far, fundamentals underpinning the U.S. economy have been stable. Employers added more than 2.6 million workers last year and the unemployment rate is at a seven-year low, Labor Department data show.

Sentiment improved among those Americans younger than 35, with that index rising to a four-month high, and consumers older than 55. Confidence deteriorated among households with incomes exceeding $75,000 a year.

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