Consumer Sentiment in U.S. Little Changed as Finances Improve

Where Are U.S. Consumers Spending Their Money?

Consumer confidence improved in the second half of February as Americans grew more upbeat about their finances, signaling that some households are starting to look beyond the turbulence in financial markets.

The University of Michigan’s final sentiment index for this month was little changed at 91.7 compared with 92 in January, a report showed Friday. The reading exceeded the median projection in a Bloomberg survey that called for 91, and the preliminary reading of 90.7.

A rebound in stocks, more job security and low inflation may have boosted Americans’ outlook for incomes. That could set the stage for further gains in consumer spending, which accounts for the lion’s share of the economy.

“In the second half of the month, market conditions seem to have stabilized a bit and fears around the economy are not quite as intense as they were earlier in the month perhaps,” Stephen Stanley, chief economist at Amherst Pierpont Securities LLC in New York, said before the report. “Most of the key fundamentals are all on the plus side for the consumer.”

Estimates from 57 economists in the Bloomberg survey ranged from 89.8 to 93.

The report’s measure of current conditions, which takes stock of Americans’ view of their personal finances, advanced to

106.8 from 106.4. The preliminary figure was 105.8.

The measure of expectations six months from now decreased to 81.9, a five-month low, from 82.7 last month.

Better Finances

The share of households reporting that their financial situation had improved rose to 47 percent compared with 40 percent in January and the highest in a year. Americans expected income gains of 1.9 percent in the year ahead, tying the January 2015 reading as the highest since 2008.

Overall, consumers said their financial prospects over the next year were the brightest since October 2006.

Americans expected the inflation rate next year will be 2.5 percent, the same as in January. Over the next five to 10 years, consumers projected prices also would climb 2.5 percent, down from 2.7 percent the prior month. While up from a preliminary reading of 2.4 percent, the final February reading for long-term price prospect matched the lowest since the late-1970s, when the university began asking about price expectations.

While low inflation expectations are a concern for Federal Reserve policy makers, they help consumers feel cheerier about their incomes.

Consumers, though, were concerned that the recent slowdown in economic growth would affect their employment prospects over the next year as they anticipated hiring would cool.

Growth Slows

A Commerce Department report Friday showed the economy grew at a revised 1 percent annualized rate in the last three months of 2015, down from 2 percent the prior quarter.

The Michigan report corroborates the weekly Bloomberg Consumer Comfort Index which has held in a narrow range over the past two months. It’s at odds with Tuesday’s Conference Board’s sentiment measure, which declined to a seven-month low in February on concerns about the economy and employment prospects.

A resilient labor market has provided a boost to Americans’ attitudes. Employers added 151,000 workers in January and the unemployment rate dropped to an eight-year low of 4.9 percent, according to the Labor Department. Wages rose 0.5 percent last month, lifted in part by minimum-wage increases in some states.

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