U.S. consumer confidence jumped to its highest level in nearly 6-1/2 years in June and sales of new homes surged in May, the latest signs that the economy has regained momentum.
Growth is accelerating after crumbling in the first quarter, but Tuesday’s robust reports likely exaggerate the strength. Nevertheless, they added to data on employment, factory and services sector activity in suggesting a sharp growth rebound.
“This is convincing evidence that the economy continues to expand,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York. “It takes a lot of confidence to buy the biggest of big-ticket items consumers ever face, buying a new home.”
The Conference Board said its consumer confidence index rose to 85.2, the highest reading since January, 2008, from 82.2 in May as households grew more optimistic about the labour market.
The reading, however, was at odds with another survey published last week that showed consumer sentiment ticking down in early June. Still, economists said it was in line with other data showing an improvement in job market conditions.
In another report, the Commerce Department said new home sales vaulted 18.6 per cent to a seasonally adjusted annual rate of 504,000 units, the highest level since May, 2008.
The increase in sales was the biggest since January, 1992. However, new homes sales data are notoriously volatile because they are drawn from a small sample, and last month’s jump likely overstates the pace of improvement.
New home sales increased in all four regions. They hit a six-year high in the Midwest and were the highest since June, 2008, in the South.
“May should be taken with a grain of salt, but the result was encouraging, particularly since it was led by a jump in the West, which has been the biggest problem area for housing market activity this year,” said Ted Wieseman, an economist at Morgan Stanley in New York.
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