U.S. consumer confidence jumped up to a five-month high in June, signaling the U.S. economy is picking up momentum.
The University of Michigan released its final results on consumer confidence for June 2015. The Consumer Sentiment Index rose to 96.1 in June, a six percent increase compared to May’s 90.7, and a more dramatic 16.5% gain year-over-year. June’s survey results also beat analysts’ expectation of the preliminary reading of 94.6 polled by Bloomberg.
Consumer sentiment reflects consumers’ opinion on the overall health of the economy. The index is based on surveys of consumers conducted by the University of Michigan. The survey asks consumers’ feelings towards their current financial health, as well as short- and long-term prospects of the health of the overall economy.
Consumers’ responses to the surveys mirror recent data for the U.S. economy. On Thursday June 24th, the Bureau of Economic Analysis reported that personal spending climbed 0.9% month-over-month, beating the 0.7% increase expected by analysts. Reports from the Labor Department suggested that the number of people filing for unemployment benefits fell to 271,000 for the week ended June 20th. It was also the 16th consecutive week that claims were below 300,000.
Earlier this week, the Bureau of Economic Analysis reported its final estimate of first-quarter U.S. gross domestic product (GDP), suggesting that the U.S. economy shrank 0.2%, a contraction less than expected. Solid consumer sentiment reported today adds more optimism to the country’s GDP outlook. The University of Michigan’s data suggests a three percent growth in consumer spending in 2015. Since two-thirds of the U.S. GDP comes from consumer spending, solid growth in this sector would be great for America’s output.
Markets did not respond very much regarding the consumer sentiment report. With Greek talks continuing and the China stock market’s dramatic crash on Friday, there is a huge amount of uncertainty surrounding the world economy. Bottom line; no one knows if the sentiment will translate into reality. Only time will tell.