Consumer Sentiment in U.S. Climbed More Than Forecast in June

U.S. Consumer Sentiment Climbs in JuneU.S. consumer confidence surged in June, which could further stimulate spending and overall economic growth later this year.

The University of Michigan’s Consumer Confidence survey beat analysts’ estimates in June, showing Americans were the most optimistic on economic condition in nearly seven years. The reading on the overall index on consumer sentiment came in at 94.6, up from the final reading of 90.7 from the previous month. (Source: University of Michigan Survey, June 12, 2015.

The report bodes well for the broader economy. The confidence survey gives the market an important insight into the state of households; the better the consumers feel, the more money they spend. Given that consumer spending is the biggest component of America’s gross domestic product (GDP), these numbers could force economists to raise their growth forecasts later.

The upbeat consumer sentiment survey capped off a week of strong economic data. On Friday, June 5, the Bureau of Labor Statistics reported that U.S. employers added 280,000 workers to their payrolls. Then on Thursday, the Census Bureau reported that retail sales grew 1.2% in May year-over-year, driven by strong gains in autos, clothing, and building materials. (Source: Bureau of Labor Statistics, last accessed June 5, 2015.)

Fed Outlook

For investors, the question now is how this strong economic data will impact monetary policy in the coming week. The Federal Open Market Committee is scheduled to gather on June 16 and 17. Rates have been kept near zero since December 2008, but a stronger job market and confident consumer could force the central bank to raise interest rates later this year.

“This improvement in the labor market has brought the economy closer to one of the two goals of monetary policy assigned to the Fed by Congress—maximum employment.” Fed Chair Janet Yellen said in Rhode Island last month. “Less progress has been made toward the other goal, price stability.” (Source: The Federal Reserve, last accessed June 12, 2015.)