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WASHINGTON - A measure of U.S. consumer confidence remained near a six-year high in June as higher home prices boosted household wealth. The survey shows Americans are feeling better about the economy, despite wild gyrations in the stock market.
The University of Michigan said Friday that its final reading of consumer sentiment in June was 84.1. That's an improvement from a preliminary reading of 82.7 issued on June 14. And it is just slightly below May's final reading of 84.5, which was the highest since July 2007.
Rising household wealth was the main reason consumers stayed optimistic. Households with income above $75,000, those more likely to own homes and stocks, reported the biggest gain.
Consumers' confidence is closely watched because their spending accounts for 70 per cent of economic growth.
Stocks pared steep early morning losses after the report was released. The Dow Jones industrial average, which was down as much as 140 points at one point, rebounded to 70 points lower at midday.
The University of Michigan polls roughly 500 people throughout the month and issues two readings.
The slight improvement from the preliminary survey suggests consumers were unfazed by Federal Reserve Chairman Ben Bernanke's June 19 comments about the Fed's bond purchases. Bernanke said the Fed could start to slow its bond buying by the end of the year and end it next year, if the economy continues to strengthen. The bond purchases have kept long-term interest rates low.
Stocks fell sharply in the days after Bernanke's comments and interest rates jumped. The average rate on the 30-year fixed mortgage surged this week to a two-year high of 4.46 per cent. That's up from 3.93 per cent last week and a full point higher than a month ago.
"Consumers remain optimistic despite recent market volatility and a back-up in mortgage rates," said Yelena Shulyatyeva, an economist at BNP Paribas.
Americans seem to agree with the Fed's view that the economy is slowly improving. A measure of their expectations for future growth rose to an eight-month high.
Employers have been adding jobs at stable pace, while the unemployment rate has slowly fallen to a still-high 7.6 per cent. Higher home sales and prices have driven a steady housing recovery. And on Tuesday the Conference Board said the improved job market helped lift its survey of consumer confidence to the highest level in 5 1/2 years, a point echoed by Friday's Michigan consumer sentiment survey.
"Consumers now believe the recovery has achieved an upward momentum that will not be easily reversed," Richard Curtin, director of the Michigan survey, said.
More Americans said they planned to buy a home, despite rising mortgage rates, according to the Michigan survey. The number of consumers who said it was a bad time to buy a home fell to the fewest in 10 years.
The survey also found that rising mortgage rates and home prices may be spurring more Americans to buy homes, rather than discouraging them. The proportion of Americans who said it is a good time to buy because rates and prices will be higher in the future reached post-recession highs this month.
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