Consumer confidence unexpectedly rose in August, showing a brightening in Americans’ moods as the labor market gains traction.
The Thomson Reuters/University of Michigan final sentiment index rose to 82.5 from 81.8 in July. The median projection in a Bloomberg News survey of economists called for 80 after a preliminary August reading of 79.2.
Payroll gains at their strongest pace since 1999 and muted firings are keeping consumers upbeat about the economic outlook. Stronger wage increases and more broad-based improvement in the labor market may be needed to return sentiment to pre-recession levels and help spur the consumer spending that accounts for about 70% of the economy.
“The main driver of consumer confidence is the job market, and that’s improving,” Michael Carey, chief economist for North America at Credit Agricole CIB. “You’re going to continue to see payroll gains, and some of those people who were not fully employed” will return to the market, providing “a boost to overall labor income.”
Estimates of the 59 economists in the Bloomberg survey ranged from 76.5 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.
The Michigan sentiment survey’s gauge of current conditions, which measures Americans’ views of their personal finances, rose to 99.8 in August, the highest in seven years, from 97.4 a month earlier. The initial figure was 99.6.
The index of expectations six months from now declined to 71.3 from 71.8 last month. That preliminary reading was 66.2.
The Conference Board’s confidence index unexpectedly climbed in August to the highest level in almost seven years as views of present conditions rose to its strongest since February 2008. Expectations for the next six months also decreased.