US consumer confidence remains high in June

Rising household wealth rather than resurgent jobs and wages was mainly responsible for the recent gains in consumer confidence, according to University of Michigan (U-M) economist Richard Curtin, director of the Thomson Reuters / University of Michigan Surveys of Consumers.

Conducted by the U-M Institute for Social Research (ISR) since 1946, the Surveys monitor consumer attitudes and expectations.

The June strength was concentrated among households with income above $75,000, with their confidence rising to its highest level since mid 2007. In contrast to the healthy gains in stocks and home values enjoyed by upper-income households, lower-income households were more likely to report income declines and no increases in their household wealth.

The June falloff in confidence among lower-income households was not large, according to Curtin, and more importantly, all income groups anticipated continued modest gains in the overall economy as well as continued slow declines in the national unemployment rate.

''Consumers now believe the recovery has achieved an upward momentum that will not be easily reversed," says Curtin. "To be sure, few consumers expect the economy to post robust gains or think the unemployment rate will drastically shrink during the year ahead. Nonetheless, consumers anticipate continued slow economic progress. Gains in spending during the balance of 2013 can be expected to be more heavily concentrated than usual among upper-income households, with the housing market serving as the bellwether industry. These prospects reflect a new type of economic revival, sparked by increases in wealth rather than by gains in jobs and wages.''

Personal finances: differential prospects
Younger and upper-income households were more likely to report income gains in the June survey, while older and lower-income households were more likely to cite lower incomes and falling living standards.

Only consumers under the age of 45 anticipated income gains that were larger than the expected rate of inflation.

Overall, just 12 per cent of all consumers expected their incomes to go up faster than next year's relatively low rate of inflation.

Favourable home buying plans
Plans for home purchases continued to improve in June.

The fewest consumers in 10 years thought it was a bad time to buy a home and the most consumers since 2006 thought home selling conditions were favourable.

The highest proportion of consumers since 2007 reported rising home values, and the highest proportion of homeowners expected additional increases in their home's value during the year ahead. Just under one-in-ten homeowners said that they would lose money if they sold their home today, half the level recorded a year ago.

The Consumer Sentiment Index was 84.1 in the June 2013 survey, barely below the 84.5 in May and well above the 73.2 recorded last June - higher in the past two months than at anytime since 2007.

The consumer confidence index, Expectations Index, rose to 77.8 in June from 75.8 in the May survey and last June's 67.8, while the Current Conditions Index was 93.8 in June, between May's 98.0 and last June's 81.5.