Consumer sentiment climbed last week and U.S. companies added more workers than projected in December, showing the world’s largest economy picked up even as lawmakers were embroiled in budget disputes.
The Bloomberg Consumer Comfort Index rose to minus 31.8 in the period ended Dec. 30, its highest since April, from minus 32.1 a week earlier, according to a report today. Figures from the ADP Research Institute showed a 215,000 increase in employment, the largest since February, while the Labor Department said more Americans filed claims for jobless benefits last week.
This week’s agreement averting income-tax increases on about 99 percent of households, combined with the pickup in hiring, may give confidence an added lift after spending at stores from Nordstrom Inc. (JWN) to Gap Inc. (GPS) topped analysts’ estimates last month. A strengthening economy lowers the risk that further deliberations on government spending cuts and the debt will derail the expansion.
“The economy is growing quite well,” said David Sloan, a New York-based senior economist at 4Cast Inc., the best ADP forecaster over the past two years, according to data compiled by Bloomberg. “The labor market seems to be expanding at a fairly solid pace. Consumer spending will continue to grow, but slowly.”
General Motors Co., Ford Motor Co. and Chrysler Group LLC posted December vehicle sales gains that exceeded analysts’ estimates in December, industry reports showed today. Auto purchases ran at a 15.3 million annual rate after 15.5 million in November, the best two months since early 2008.
Consumer Spending in U.S. Rose in Line With Forecast in June
Consumer spending in the U.S. rose in line with forecasts in June as Americans’ incomes (PITLCHNG) grew, a sign the biggest part of the economy is withstanding fiscal headwinds.
Household purchases, which account for about 70 percent of the economy, rose 0.5 percent, after a 0.2 percent increase the prior month that was less than previously estimated, the Commerce Department reported today in Washington. The median forecast in a Bloomberg survey of economists called for a 0.5 percent rise. Incomes advanced 0.3 percent.
Rising home values, stock price gains, and an improved job market are cushioning the effects of a payroll tax increase that began in January. Bigger spending gains are needed to overcome federal budget cuts and weak overseas economies, which are slowing growth.
“Consumers continue to spend but they’re effectively treading water,” Omair Sharif, U.S. economist at RBS Securities in Stamford, Connecticut, said before the report. “There’s not a lot of momentum but they’re holding their own for the most part.”
Home Prices in U.S. Increased by Most Since 2006 in May
Home prices rose in May by the most in more than seven years as the recovery in U.S. residential real estate gained momentum.
The S&P/Case-Shiller index of property values climbed 12.2 percent from May 2012, the biggest 12-month gain since March 2006, after advancing 12.1 percent a month earlier, a report showed today in New York. The median projection of 31 economists surveyed by Bloomberg called for a 12.4 percent advance.
Historically low borrowing costs, short supply and improving job market are boosting demand for residential property and driving prices up. The climb in home values is also bolstering household finances, which may spur consumer spending, the largest part of the U.S. economy.
“We continue to look forward to upward momentum” in the housing market, said Anika Khan, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina, a subsidiary of the largest U.S. mortgage lender. “We still have historically low inventory levels.”
U.S. Housing Prices Increased More Than Forecast in April
Home prices climbed more than forecast in the 12 months through April, rising by the most in more than seven years and showing further strength in the U.S. housing market.
The S&P/Case-Shiller index of property values increased 12.1 percent from April 2012, the biggest year-over-year gain since March 2006, after advancing 10.9 percent a month earlier, a report showed today in New York. The median forecast in a Bloomberg survey of 28 economists called for a 10.6 percent advance
Short supply, record-low mortgage rates and an improving job market combined to boost housing demand and spark the rebound in prices. The recovery is probably far enough along to overcome the recent surge in borrowing costs after Federal Reserve policy makers said they may trim unprecedented accommodative measures meant to spur the expansion.
“Housing’s doing really well and I don’t think the backup in mortgage rates to date is going to derail it,” said Brian Jones, senior U.S. economist in New York at Societe Generale, who projected a 12.3 percent rise in home prices. “We’re still well off the highs, but price increases could continue for the next several years.”
Bloomberg survey estimates ranged from increases of 9.9 percent to 12.3 percent. The S&P/Case-Shiller index is based on a three- month average, which means the April data were influenced by transactions in February and March.
Consumer Confidence in U.S. Increases More Than Forecast
Confidence among U.S. consumers climbed in June to the highest level in more than five years, an indication spending will probably accelerate after cooling this quarter.
The Conference Board’s index rose to 81.4, exceeding all forecasts in a Bloomberg survey and the highest since January 2008, from a revised 74.3 in May, data from the New York-based private research group showed today. The median forecast of 77 economists surveyed by Bloomberg called for a reading of 75.1.
Rising residential property values and stock prices, combined with gains in employment, have spurred demand for housing and automobiles as households gain confidence the expansion will be sustained. Nonetheless, the recent slump in shares and surge in interest rates pose a risk to sentiment should hiring also suffer.
“Unambiguously, the economy is showing signs of improvement despite sizable fiscal drag,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics in Valhalla, New York, who is the top-ranked forecaster of confidence in the past two years, according to data compiled by Bloomberg. Among the positives “has been the improving labor market, but in addition, wealth in general has been rising, at least up until the last week.”
Forecasts in the Bloomberg survey of economists ranged from 72 to 79.5 after a previously reported 76.2 in May. The measure averaged 53.7 in the recession that ended in June 2009.
The Conference Board said the cutoff day for responses to be included in the report was June 13. Since then equities have declined.
New-Home Sales in U.S. Increased More Than Forecast in May
Sales of new U.S. homes climbed more than forecast in May to the highest level in almost five years, a sign of continued strength in a market that’s helping fuel economic expansion.
Purchases (ETSLTOTL) rose 2.1 percent to an annualized pace of 476,000 homes, exceeding all estimates in a Bloomberg survey and the most since July 2008, the Commerce Department said today in Washington. The median selling price climbed 10.3 percent from May 2012
New and previously owned homes are in demand, driving residential construction and aiding the economic expansion. Consumers who long held off on purchases are entering the market even as borrowing costs increase, encouraged by rising property values and gains in employment.
“The housing recovery is alive and well and has a long way to go, and higher rates aren’t going to choke it off,” said Joe LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York, who projected a gain to 475,000, matching the highest in the Bloomberg survey. “‘It’s given the economy, or will give the economy, a lot of oomph.”
The median estimate of 74 economists surveyed by Bloomberg called for a gain to 460,000. Projections ranged from 435,000 to 475,000. Monthly sales data all the way back to February were revised up, with April now at a 466,000 annualized rate compared with a previously reported 454,000 pace.
Other reports today showed manufacturing is stabilizing, price gains for existing houses are accelerating and consumer confidence (USHBMIDX) is climbing.
Orders for U.S. Durable Goods Rose More Than Forecast
Orders for U.S. durable goods rose more than forecast in May, reflecting broad-based gains that signal manufacturing is stabilizing.
Bookings for goods meant to last at least three years climbed 3.6 percent for a second month, the Commerce Department reported today in Washington. The median forecast of 81 economists surveyed by Bloomberg called for a 3 percent increase. Excluding transportation gear, where demand is volatile month to month, orders advanced 0.7 percent, also topping projections.
Growing demand for cars and trucks and gains in homebuilding are helping counter weakness in export markets, benefiting manufacturers such as BorgWarner Inc. (BWA) and United Technologies Corp. (UTX) Businesses may also decide to replace aging equipment, which will help bolster expansion in the second half of 2013.
“This is the missing piece for an upswing in economic activity,” said Millan Mulraine, director of U.S. rates research at TD Securities USA LLC in New York. “Business capital investment activity is off to a strong showing. If businesses start investing, they’ll add to their workforce.”
Other reports today showed prices of existing homes and sales of new dwellings both increased more than forecast.
Index of Leading Indicators in U.S. Rises Less Than Forecast
The index of U.S. leading indicators rose less than projected in May, a sign the world’s largest economy may take time to accelerate.
The Conference Board’s gauge of the outlook for the next three to six months increased 0.1 percent after a revised 0.8 percent gain in April that was higher than initially reported, the New York-based group said today. The median forecast of economists surveyed by Bloomberg called for a rise of 0.2 percent.
Automatic cuts in planned federal spending that began on March 1 are projected to weigh on economic growth this quarter. At the same time, the rebound in housing, rising stock prices and an improving job market mean households will sustain their spending, which accounts for about 70 percent of the economy.
“There are indications of a moderation in growth,” Jonathan Basile, a U.S. economist at Credit Suisse Holdings USA in New York, said before the report. “The slowdown will be temporary. It’s just going to take some time for the economy to turn up.”
Estimates of 45 economists in the Bloomberg survey ranged from no change to an increase of 0.5 percent.
Three of the 10 indicators in the leading index contributed to the increase, today’s report showed. The positives were stock prices, a credit index and the interest-rate spread between the federal funds rate and 10-year Treasury notes.
Factories in Philadelphia Fed Region Rise at Faster Pace
Manufacturing in the Philadelphia region unexpectedly grew in June at the fastest pace in two years as factories showed resilience in the face of slowing overseas markets.
The Federal Reserve Bank of Philadelphia’s general economic index climbed to 12.5, exceeding all forecasts in a Bloomberg survey and the highest since April 2011, from minus 5.2 in May. Readings greater than zero signal expansion in the area, which covers eastern Pennsylvania, southern New Jersey and Delaware.
The data corroborate figures earlier this week showing improved sentiment at factories in the New York Fed region even as global growth cools. In the U.S., a pickup in auto and home sales, combined with the diminishing effects of this year’s across-the-board federal spending cuts, may prompt businesses to boost spending and lift production.
“Once we get a little more clarity on the global growth picture, it might be easier for manufacturers to start ramping up a little bit,” Gennadiy Goldberg, U.S. strategist at TD Securities Inc. in New York, said before the report. “Over the next couple months you should start seeing a little more stabilization. It should start to improve later in the year.”
Economists forecast the gauge would improve to minus 2, according to the median estimate in a Bloomberg survey. Estimates (OUTFGAF) ranged from minus 8 to 5.
Consumer Prices in U.S. Increased Less Than Forecast in May
The cost of living in the U.S. rose less than forecast in May, restrained by the first drop in food prices in almost four years and signaling inflation remains under control.
The consumer price index was up 0.1 percent after falling 0.4 percent in April, the Labor Department reported today in Washington. The median forecast of 82 economists surveyed by Bloomberg News called for an increase of 0.2 percent. The core index, which excludes volatile food and fuel costs, climbed 0.2 percent as projected.
A recession in Europe and slower growth in emerging markets such as China, combined with restrained wage gains in the U.S., have made it difficult for companies to raise prices. The lack of inflation gives Federal Reserve policy makers, meeting today and tomorrow in Washington, more leeway to address unemployment as they consider whether to dial down their record monetary stimulus.
“We don’t’ really have an inflation issue in this country,” said Omair Sharif, an economist at RBS Securities Inc. in Stamford, Connecticut. “Some Fed officials have expressed concern about inflation, but I think the Fed is cognizant of the fact that we’re probably at the low readings on inflation.”
Construction began on more houses in May and permits for future work on single-family projects rose to a five-year high, extending a rebound in residential real-estate that is helping shore up the expansion, another report showed today.
Housing Starts in U.S. Rose in May to 914,000 Annual Rate
Builders began work on more U.S. houses in May and permits for new single-family homes rose to a five-year high as residential real estate underpins an economy that’s generating little inflation.
Housing starts climbed 6.8 percent, less than forecast, to a 914,000 annualized rate from a revised 856,000 in April, Commerce Department figures showed today in Washington. Applications for one-family home construction increased to a 622,000 pace, the fastest since May 2008. Data from the Labor Department showed May consumer prices rose less than projected.
Building permits that exceed the pace of ground-breaking signal further construction gains that will propel growth as manufacturing cools and federal budget cuts take hold. Inflation below the Federal Reserve’s 2 percent goal gives policy makers the leeway to address joblessness as they consider at their meeting today and tomorrow when to dial down record monetary stimulus.
“The housing recovery is still very much on track, and we’re going to see stronger activity in the second half of the year,” said Mark Vitner, an economist in Charlotte, North Carolina, at Wells Fargo Securities LLC, a unit of the top U.S. mortgage lender. “I think a lot of people have been looking at the stimulus by the Fed and expecting inflation to pick up. To have inflation you have to have stronger economic growth.”