Consumer Sentiment Reaches 7-Year High
Consumer confidence in the United States unexpectedly rose in October to the highest level in seven years, showing a brightening in Americans’ moods as gas prices drop and the labor market gains traction.
The Thomson Reuters/University of Michigan preliminary sentiment index for this month increased to 86.4, the strongest since July 2007, from a final reading of 84.6 in September. The median projection in a Bloomberg survey of 67 economists called for 84.
Job gains on pace for their strongest year since 1999 and cheaper gas prices are keeping households upbeat about economic expansion amid the weakening in Europe and emerging nations. Faster wage increases and more broad-based improvement in the labor market would help spur the consumer spending that makes up about 70% of the economy.
“An improving job market and lower energy costs are going to offset a lot of what’s happening,” said Joseph LaVorgna, chief U.S. economist of Deutsche Bank Securities Inc. in New York, who projected the index would rise to 86.
Estimates in the Bloomberg survey ranged from 81 to 87. 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.
Stocks rose after the report, adding to earlier gains, as earnings beat estimates and investors speculated that central banks will support economic growth with more stimulus.
Work began on more homes in September, indicating gains in residential construction will help bolster economic growth, another report showed Oct. 17. Housing starts climbed 6.3% to a 1.02 million annualized rate from a 957,000 pace in August, the Commerce Department reported. Work increased on multifamily and one-family homes.
The gain in confidence reflected a jump in Americans’ expectations about the economy six months from now as that gauge rose to 78.4 in October, a two-year high, from 75.4 last month. The gauge of current conditions, which measures Americans’ views of their personal finances, was unchanged at 98.9.
