Consumer confidence rises in US with rising home prices

Consumer confidence unexpectedly shot up in April, alongside a spurt in home values earlier this year, showing the recovery in residential real estate was lending strength to the US economy.

The Conference Board's sentiment index was up at 68.1, exceeding the highest expectations of analysts. The S&P/Case-Shiller index of home prices across 20 cities increased to 9.3 per cent in February from the same month in 2012, the biggest year-to-year advance since 2006.

The Conference Board is a US non-profit business organisation that provides information on consumer confidence, leading economic indicators and the Consumer Confidence Index.

Household spending in the first quarter surged at a 3.2 per cent annualised rate, the biggest gain since the fourth quarter of 2010, according to commerce department figures on 26 April.

According to analysts, finances ravaged by recession were under mend thanks to increasing home and stock prices, with sentiment picking up, that might limit any slowdown in household spending, the biggest part of the economy.

For the present though, rise in the payroll tax and cuts in federal outlays might start pinching, leading to a slackening in manufacturing that was restraining growth.

The MNI Chicago Report's business barometer, considered a proxy for factory activity, was down to 49 in April, the lowest level since September 2009, from 52.4 last month, according to other figures. A reading less than 50 is an indicator of contraction.

According to analysts, manufacturing would start picking up ultimately in the second half of the year as drag started to fade, however, for now it was still looking pretty sluggish.

The group's Consumer Confidence Index rose to 68.1 this month after dropping to 61.9 in March.

Though the Consumer Confidence Index reading showed an improvement, it was too soon to tell "if confidence was really on the mend, according to Lynn Franco, the Conference Board's director of economic indicators.

She noted that "consumers' confidence had been hurt several times over the past few months" by a series of events, including concerns about the so-called fiscal cliff, the payroll tax increase that kicked in on 1 January, as also the looming federal budget cuts known as sequestration.

Though consumers' views about the current economic conditions moderately improved in April, people continued to be more optimistic about the short-term outlook.

The percentage of respondents who expected an improvement in business conditions over the next six months rose to 16.9 per cent from 15 per cent in March.

Additionally, the percentage of consumers who expected increased income was up at 16.8 per cent from 14.6 per cent.

The Conference Board data, however, was not in line with another leading gauge of consumer confidence released last week.

The Thompson Reuters/University of Michigan Survey of Consumers index was down 2.8 per cent in April from the previous month, however, the figure had been lower earlier in the month and had picked up toward the end of April.