Consumer sentiment survey finds sunnier outlook

Consumers' mood brightened this month, despite other evidence that their spending is still cautious.

The Thomson Reuters/University of Michigan survey's consumer sentiment index for June rose to 82.5 from 81.9 in May.

That's below the survey's most recent high in April and June 2013 -- 84.1 for both months. Its 12-month high was 85.1 in July.

But Richard Curtin, director of the University of Michigan's consumer surveys, said it was significant that the sentiment index reading had stayed largely unchanged for six months despite the economy's sharp contraction early this year.

Consumers blame the decline on the harsh winter weather and instead have focused on the labor market's string of strong gains, he said. The U.S. has gained more than 200,000 jobs a month in February through May.

June's consumer sentiment survey found the highest share of households reporting making financial gains in nearly seven years, he said.

"The proportion of households that reported improved finances over the past year was 40% in June, up from 35% one month and one year ago," Curtin said in a statement.

But only a quarter of households expected their finances to improve in the year ahead. "The biggest concerns were focused on expected wage growth, which most households expected would not exceed the inflation rate, meaning that nearly half of all households anticipated declining living standards," he said.

The Thomson Reuters/University of Michigan's June survey also found half of all homeowners reporting home selling conditions as favorable for the first time in eight years.

Another survey this week also indicated consumers are feeling better about the economy. The Conference Board's consumer index reached its highest level in six years this month.

The Commerce Department reported Thursday that consumer spending rose 0.2% in May after no gain in April. Income rose 0.4% after a 0.3% gain in April.

The spending numbers were below some economists' forecasts, which in turn has raised doubts about the prospects for stronger growth in consumer spending in the current quarter.

The government reported this week that the economy suffered its worst setback in five years during the first quarter, shrinking at an annual rate of 2.9% from last year's final quarter. It was one of the worst falls in the nation's gross domestic product outside of a recession since 1960. A significant factor was weak consumer spending, which grew only 1% from the fourth quarter -- well below what economists had estimated earlier.

Strong consumer spending is critical for the broader economy's growth because it accounts for more than two-thirds of U.S. economic activity.

Source:

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