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Confidence Little Changed Amid Improving Views on U.S. Economy

May 30, 2013

May 30 (Bloomberg) -- Consumer sentiment last week hovered near a five-year high as more Americans said the economy was improving and their finances were mending.

The Bloomberg Consumer Comfort Index was at minus 29.7 in the period ended May 26 compared with minus 29.4 a week earlier. The margin of error for the figure is 3 percentage points. Views on the current state of the economy matched a mid-April reading as the strongest since January 2008.

Rising home and stock values are helping bolster confidence among upper-income households as they recover losses suffered during the recession. Nonetheless, the total index has shown little forward momentum since reaching a five-year high of minus 28.9 in April, indicating those of less means are susceptible to setbacks should employment cool or gasoline costs rise.

"Sustained improvement in employment, gasoline prices and equities, which has created a modest wealth effect among consumers at the upper end of the income spectrum, has continued to support consumer confidence," said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. "Overall sentiment may stall near these levels without a commensurate increase in wages and salaries down the income ladder."

Sentiment for households earning between $75,000 and $100,000 annually reached a five-year high, climbing last week to within a point of the reading for those making even more.

Other reports over the past two weeks have corroborated last month’s pickup in comfort. The Conference Board’s confidence index rose in May to the highest level since February 2008, while the Thomson Reuters/University of Michigan sentiment gauge reached an almost six-year high this month.


Housing Rebound


The rebound in housing is one reason for the brightening moods. The S&P/Case-Shiller index of property values in 20 cities increased 10.9 percent in the year to March, the biggest 12-month gain since April 2006, a report showed this week.

The economy expanded less than previously estimated in the first quarter as slower inventory building and cutbacks in government spending overshadowed the biggest gain in consumer purchases since the end of 2010, figures from the Commerce Department showed today.

Gross domestic product rose at a 2.4 percent annualized rate, revised from the 2.5 percent pace initially reported. Household purchases climbed at a 3.4 percent pace, almost twice as fast as the prior quarter’s 1.8 percent gain.

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