American consumers turned more confident in December as hiring picked up, brightening the outlook for spending heading into 2014.
The Conference Board said its sentimentindex climbed to 78.1 from 72 in November, exceeding the median forecast of economists surveyed by Bloomberg and the strongest year-end reading since 2007. Other reports showed home prices climbed at the fastest pace in more than seven years and manufacturing was in a sustained expansion. The biggest employment gain in eight years, the rebound in housing and record stock values are boosting household wealth, which will help support spending in the new year. Companies from Ford Motor Co. (F)to Apple Inc. (AAPL) are pledging to expand operations in the U.S. as demand improves, a sign the world’s biggest economy will strengthen in 2014.
“We’re ending 2013 with good momentum,” said Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut, and the second-best forecaster of consumer confidence over the past two years, according to data compiled by Bloomberg. “We’ve seen progress in the labor market. The rise in home values along with the run-up in equity prices is a big element of why people are feeling better.”
U.S. stocks rose, with the Standard & Poor’s 500 Index poised for its biggest annual advance since 1997, as data showed an improving economy. The S&P 500 climbed 0.3 percent to 1,846.72 at 12:13 p.m. in New York.
Home Values
Another report today showed home prices in 20 cities rose in October from a year ago by the most since February 2006, signaling the real-estate rebound will keep bolstering household wealth. The S&P/Case-Shiller index of property prices climbed 13.6 percent from October 2012 after a 13.3 percent increase in the year ended in September. A dwindling inventory of foreclosed properties has helped restrict the supply of homes for sale, pushing up prices even as higher mortgage rate cool demand. The real-estate market will probably get its next boost from gains in employment.
“There’s certainly room for home prices to continue rising in the coming year,” said Dana Saporta, an economist at Credit Suisse in New York, who projected a 13.7 percent advance in prices in the year ended in October. “As home prices continue to rise, more and more homeowners who are underwater on their mortgages will see their financial situations improving. Just getting out of that underwater position should be a big help to the economy.”
Survey results
The median projection in a Bloomberg survey of 59 economists called for the consumer confidence index to climb to 76. The Conference Board, a New York-based research group, today also revised up the November reading from a previously reported 70.4. The index averaged 53.7 in the recession that ended in June 2009.
The group’s present conditions barometer increased to 76.2, the highest reading since April 2008. Consumers’ assessments of current labor-market conditions also improved. The share of respondents who said positions were hard to get dropped this month to the lowest level since September 2008. Payrolls expanded by 203,000 workers in November after a 200,000 gain in October, and the jobless rate fell to a five-year low of 7 percent, according to Labor Department data. Employment is forecast to increase about 190,000 this month, which would make 2013 the best year since 2005. The improvement in the economy and labor market helps explain why the Federal Reserve on Dec. 18 decided it will trim monthly bond purchases to $75 billion from $85 billion starting in January.
Expectations Brighten
The Conference Board’s gauge of consumer expectations for the next six months jumped to 79.4, the highest since September, from 71.1 a month earlier. The proportion of Americans who said jobs would become more plentiful in the next six months rose to a four-month high. “Despite the many challenges throughout 2013, consumers are in better spirits today than when the year began,” Lynn Franco, director of economic indicators at the Conference Board, said in a statement. The gain tracked advances in other confidence measures. The Bloomberg Consumer Comfort (COMFCOMF) Index jumped to a four-month high for the week ended Dec. 22. The Thomson Reuters/University of Michigan index climbed in December to a five-month high. Automakers are among companies benefiting from growing confidence. Auto sales advanced to a 16.3 million annualized rate in November, the highest since May 2007, according to data from Ward’s Automotive Group.
Adding Jobs
Dearborn, Michigan-based Ford said this month it plans to add 5,000 jobs in the U.S. as it introduces 16 new vehicles in 2014.
“We also expect manufacturing, engineering and spending related costs in North America to increase next year due to the 2014 launches as well as for products and capacity actions that will be launched in later periods,” Chief Financial Officer Robert L. Shanks said in a Dec. 18 guidance call. He said the company “is, has been, and continues to be in growth mode.”
Cupertino, California-based Apple started taking orders this month for the new Mac Pro personal computer, which is being built in Texas with components made domestically as part of Chief Executive Officer Tim Cook’s $100 million Made-in-the-USA push. Improving sales are prompting factories to boost output, giving the U.S. economy another boost. Business activity expanded in December, capping the strongest three months in more than two years, another report showed today.
Sustained Growth
While the MNI Chicago Report business barometer declined to 59.1 from 63 in November, numbers greater than 50 signal growth. The index averaged 62.7 over the past three months, the highest since the period ended May 2011. Manufacturing, which makes up about 12 percent of the economy, has been expanding as demand for automobiles, construction materials and appliances keep factory assembly lines humming. A pickup in business investment and economic improvement overseas would help sustain gains and support growth into the new year.
“Some of the missing pieces for a stronger economic recovery are falling into place,” said Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania. “The consumer’s still going to have to do some of the heavy lifting, particularly early on in the year until the housing cycle kicks in and business investment ramps up.”
To contact the reporter on this story: Shobhana Chandra in Washington atschandra1@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net