Confidence Holds Near 6-Year High on Housing
Washington — Consumer sentiment held close to a six-year high in June as higher home values gave Americans more reason to be optimistic about the economy.
Thomson Reuters/University of Michigan said Friday its final confidence index for this month eased to 84.1, higher than the median forecast in a Bloomberg survey, from 84.5 at the end of May. The group’s measure of the economic outlook climbed to an eight-month high. Other data from the MNI Chicago Report showed manufacturing is struggling to gain traction.
An improving housing market is sustaining sentiment and making up for the hit to household wealth from a recent setback in stock prices. Further strides in employment and housing will help provide more fuel for an economy beset this quarter by federal budget cuts.
“Consumers are more attuned to the labor market gradually getting better and the rise in house prices” rather than declining stock prices or increasing mortgage rates, said Guy Berger, an economist at RBS Securities Inc. in Stamford, Conn., who projected a sentiment reading of 84. “Growth in the second half is going to be a little better than it is in the first half.”
The MNI Chicago Report’s business barometer dropped to 51.6 this month from 58.7 in May, which was the highest in more than a year. A reading of 50 is the dividing line between expansion and contraction. The median forecast of 56 economists surveyed by Bloomberg was 55.
The index has been out of sync with other regional factory reports, surging in May when others pointed to a slump, and dropping this month as measures from the Federal Reserve Banks of New York and Philadelphia point to a rebound.
The Chicago group’s measure of new orders fell in June from a three-month high, while backlogs slumped to the lowest level since September 2009. Manufacturing makes up about 12 percent of the economy.
“It’s going to be an uneven path toward growth,” said Thomas Simons, money market economist at Jefferies & Co. Inc. in New York. “Manufacturing should gain steam in the second half” of 2013.
American factories stand to gain as economies in Europe and Japan stabilize. German retail sales rose in May more than economists forecast, adding to signs that a recovery in Europe’s largest economy has gathered pace amid record-low interest rates.
In Japan, the economy strengthened in May as factory output rose the most since December 2011 and retail sales climbed.
The drop in the Michigan survey this month was centered in the current conditions index, which takes stock of Americans’ views of their personal finances. The measure decreased to 93.8 from 98 in May, which was the highest since August 2007. It compared with a preliminary June reading of 92.1.
The index of expectations six months from now climbed to an eight-month high of 77.8 from 75.8 in May.