Consumer Sentiment in U.S. Increases on Outlook for Economy
Consumer confidence in the U.S. improved in February from a month earlier as more consumers grew optimistic about the outlook for the economy.
The Thomson Reuters/University of Michigan final index of sentiment rose to 81.6 this month from 81.2 in January. The median estimate in a Bloomberg survey of economists called for the measure to hold at its preliminary reading of 81.2.
Sustained sentiment indicates spending may pick up after bad winter weather across much of the U.S. caused some Americans to stay close to home rather than shop. Wage growth and more hiring would help further brighten spirits and give consumers the wherewithal to increase their purchases.
“We need companies to start expanding and hiring people and that will raise consumer confidence.” Yelena Shulyatyeva, U.S. economist at BNP Paribas in New York, said before the report. “Consumer spending will continue on same pace and grow modestly throughout the year.”
Estimates of the 67 economists in the Bloomberg survey ranged from 78 to 82.5. 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.
Another report from the Commerce Department today showed the economy expanded in fourth quarter at a 2.4 percent annual rate, slower than initially estimated. Smaller gains in consumer spending, inventories and exports weighed on growth.
Stocks rose after the figures. The Standard & Poor’s 500 Index, which closed at a record yesterday, climbed 0.6 percent to 1,865.27 at 10:16 a.m. in New York.
The Michigan sentiment survey’s index of expectations six months from now increased to a six-month high of 72.7 from 71.2 last month. The preliminary reading was 73. The gauge of current conditions, which measures Americans’ view of their personal finances, dropped to 95.4 in February from 96.8 a month earlier. The initial reading for February was 94.
Cold temperatures and winter storms have helped limit progress in the labor market. A report yesterday from the Labor Department showed more Americans that forecast filed applications for unemployment insurance.
Earlier this month, the agency reported a 113,000 increase in payrolls in January after a 75,000 advance the previous month. At the same time, the jobless rate declined to 6.6 percent, the lowest since October 2008.
“The recovery in the labor market is far from complete,” Federal Reserve Chair Janet Yellen said in a testimony before the Senate Banking Committee yesterday. “The unemployment rate is still well above levels that the federal Open Market Committee participants estimate is consistent with maximum sustainable employment.”
Other measures of consumer sentiment have been mixed. The Bloomberg Consumer Comfort Index (COMFCOMF) rose for the third straight week in the period ended Feb. 23. The New York-based Conference Board’s measure fell more than expected in February as consumers grew more concerned about the economy’s future.
Frigid weather and snowfall may be partly to blame for a slowdown in spending. Last month was the coldest January since 1994 in the contiguous U.S., based on gas-weighted heating-degree days, a measure of energy demand, according to Commodity Weather Group LLC in Bethesda, Maryland.
“While the harsh winter weather has kept consumers away from retail outlets, it has not had a detrimental impact on their outlook for future economic conditions,” Richard Curtin, chief economist for the consumer sentiment survey. “Consumers have displayed remarkable resiliency in the face of the polar vortex as well as higher utility bills and minimal employment gains.”
A report last week from the Commerce Department showed retail sales declined in January by the most since June 2012. The drop was broad-based, with nine of 13 major categories showing falling last month, led by auto dealers, sporting goods stores and apparel outlets.
Today’s GDP report showed household purchases rose at a 2.6 percent pace, down from an initially reported 3.3 percent advance.
Other figures showed business activity in the Chicago area accelerated unexpectedly in February, adding to signs manufacturing gains will be sustained in 2014. The Institute for Supply Management-Chicago Inc. said its business barometer increased to 59.8 this month from 59.6 in January. The median forecast of 53 economists in a Bloomberg survey called for the index to fall to 56.4. Readings greater than 50 signal growth.
To contact the reporter on this story: Katherine Peralta in Washington at firstname.lastname@example.org