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Consumer confidence in U.S. rises more than forecast on jobs

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(Bloomberg) — Consumer confidence rose more than forecast in January to the highest level since August 2007 as Americans took heart in an improving labor market and prospects for higher earnings.

The Conference Board’s consumer confidence index increased to 102.9 this month from a revised December reading of 93.1, the New York-based private research group said Tuesday.

Plummeting gasoline prices and a labor market that delivered almost 3 million jobs in 2014 and drove the unemployment rate to a six-year low are boosting sentiment about the domestic economy. Growing confidence raises the odds that consumer spending will power the world’s largest economy past a global slowdown.

“A more positive assessment of current business and labor- market conditions contributed to the improvement in consumers’ view of the present situation,” Lynn Franco, director of economic indicators at the Conference Board, said in a statement.

The median forecast of 77 economists in the Bloomberg survey called for an increase in the gauge to 95.5, with estimates ranging from 90.1 to 102. The Conference Board’s measure averaged 96.8 during the last expansion and 53.7 during the recession that ended in June 2009.

Stocks remained lower as a drop in durable-goods orders and disappointing results from Caterpillar Inc. to Microsoft Corp. heightened concern over the economy’s strength and the outlook for corporate profits. The Standard & Poor’s 500 Index was down 1.6 percent to 2,024.27 at 10:39 a.m. in New York.

The Conference Board’s index of consumer expectations for the next six months increased to 96.4, from 88.5 in December.

Present conditions

The gauge of present conditions jumped to 112.6 after 99.9 the prior month. The share of Americans who said business conditions were good increased to 28.1 percent from 24.7.

The Conference Board’s data showed Americans’ assessments of current and future labor-market conditions improved. The share of Americans who said jobs were plentiful increased to 20.5 percent from 17.2 percent. The share that said jobs were hard to get fell to 25.7 percent from 27.3 percent in December.

The proportion of consumers expecting more jobs to become available in the next six months increased to 16.7 percent from 14.6 percent.

More on this topic

The share of respondents that said they expected their incomes to rise in the next half year rose, to 20 percent this month from 16.2 percent in December.

Fewer people said they planned to buy new appliances within the next six months, including televisions, vacuum cleaners and washing machines. Buying plans for homes were little changed.

Michigan survey

Today’s report joins other readings on sentiment that indicate positive momentum for the U.S. The University of Michigan preliminary consumer sentiment index for January rose to 98.2, an 11-year high, while Bloomberg’s weekly Consumer Comfort Index has been hovering near a more than seven-year high.

The labor market posted its best year since 1999, with employment gains and falling jobless rates boosting the economic outlook. Employers added 252,000 workers to payrolls in December, after a 353,000 increase the prior month that was more than previously estimated, Labor Department data showed this month. The jobless rate dropped to 5.6 percent, the lowest level since June 2008.

Gasoline prices

Cheaper gasoline has boosted consumer spending, the largest driver of the economy. A gallon of regular fuel at the pump cost $2.03 on average on Jan. 25, the lowest since March 2009, based on data from AAA, the largest U.S. auto group.

Lower gas prices have also given a lift to domestic airline companies like United Continental Holdings Inc. and Southwest Airlines Co., which predicted that fuel costs will hit their lowest in more than five years this quarter, boosting profits in a typically slow period.

Southwest saw revenue up $200 million in the fourth quarter and fuel expenses down. “The result was a beautiful thing,” Gary Kelly, Southwest’s chairman, said on a Jan. 22 earnings call.

“Consumers are going to have a lot more money in their pockets to travel,” Kelly said. “I think what is more worrisome about the future is just what’s going on around the world and what impact that might have on the U.S. economy and what impact that might have on consumers and businesses and travel demand.”