(Bloomberg) — Consumer confidence climbed more than forecast in August to the second-highest level in eight years as Americans held more favorable views of the labor market.
The Conference Board’s index rose to 101.5 this month from a revised July reading of 91, the New York-based private research group said Tuesday. The gauge exceeded the highest estimate in a Bloomberg survey of economists, whose median forecast was 93.4. The cutoff date for the survey was Aug. 13, before the recent stock-market sell-off.
Americans remained emboldened by job gains, cheaper gasoline and rising home prices in the period leading up to a slump in stock prices as global financial markets took a turn for the worse. The risk for the economy is that households will reassess their spending plans as they wait for evidence the U.S. expansion can withstand such shocks.
“People are recognizing that labor markets have become pretty healthy,” said Stephen Stanley, chief economist at Amherst Pierpont Securities LLC in Stamford, Connecticut. Still, “the worst of the turbulence has happened long after these surveys were filled out. If you took the survey again today, you would imagine the results would be a little softer.”
August marked the second-highest sentiment reading since the same month in 2007. Estimates in the Bloomberg survey ranged from 89 to 96.5. The Conference Board’s gauge averaged 96.9 during the last expansion and 53.7 during the recession that ended June 2009. Responses received by the Conference Board after the mid-month cutoff data are used to produce revisions and are published the following month.
Among other reports Tuesday, new-home sales rose 5.4 percent in July, the most this year, according to the Commerce Department. An S&P/Case-Shiller index of property values rose 5 percent in the 12 months ended in June after similar year-over-year gains in the previous three months.
Demand for new properties is likely to keep expanding amid strong employment, low borrowing costs and a lack of available existing homes from which to choose. The improving outlook may spur more residential construction, contributing to the economic expansion in the second half of the year.
The Conference Board’s gauge of present conditions was the strongest since November 2007, reflecting more upbeat assessments about the labor market. The share of Americans who said jobs were plentiful climbed to the highest level since January 2008. The share of those saying employment is difficult to find dropped to a more than seven-year low.
“Consumers’ assessment of current conditions was considerably more upbeat, primarily due to a more favorable appraisal of the labor market,” Lynn Franco, director of economic indicators at the Conference Board, said in a statement. “The uncertainty expressed last month about the short-term outlook has dissipated and consumers are once again feeling optimistic about the near future. Income expectations, however, were little improved.”
The share of Americans expecting an increase in incomes dropped in August to the lowest this year. The index of consumer expectations for the next six months rose to 92.5 from 82.3 in July.
The Conference Board’s data showed Americans’ assessments of future labor-market conditions also picked up. The proportion of consumers expecting more jobs to become available in the next six months rose to 14.6 percent from 13.7 percent in July.
Rocky market conditions may yet weigh on consumers’ spirits. As of Monday, more than $5 trillion had been erased from the value of global equities since China unexpectedly devalued the yuan on Aug. 11, a rout that has investors questioning whether the U.S. can hold up in the face of weaker economies abroad.
Economy-watchers are speculating on whether the volatility will prompt the Federal Reserve to delay raising interest rates. In addition to its dual mandate of full employment and price stability, the central bank will likely weigh market conditions in its decision.
The fundamentals of the economy should lend some stability to the picture. Payrolls have climbed by an average 211,000 a month this year, while the unemployment rate lingers at a seven- year low, LaborDepartment data show.
Faster wage gains would go a long way toward boosting Americans’ confidence, though they’ve remained stubbornly restrained. Average hourly earnings climbed 2.1 percent in the year ended July, within the same narrow channel that employee pay has tracked since the recovery –With assistance from Kristy Scheuble in Washington.