NEW YORK (Reuters) - Consumer sentiment improved in late June, ending the month close to a near six-year high set in May, as optimism among higher-income families rose to its strongest level in six years, a survey released on Friday showed.
The Thomson Reuters/University of Michigan’s final reading on the overall index on consumer sentiment was 84.1 points, just slightly below a near six-year high of 84.5 in May. The late-June figure was higher than the preliminary reading of 82.7.
Economists polled by Reuters had forecast the final June reading of 82.8.
“Consumers believe the (economic) recovery has achieved an upward momentum that will not be easily reversed,” survey director Richard Curtin said in a statement.
He added the recent drop in stock prices and the jump in mortgage rates have not caused a deterioration in consumers’ view on the economy.
“To be sure, few high or low income consumers expect the economy to post robust gains or think the unemployment rate will drastically shrink during the year ahead,” Curtin said.
Consumer sentiment is considered by some economists as a predictor on consumer spending, which accounts for 70 percent of the U.S. economy.
The latest Thomson Reuters/University of Michigan data was consistent with the June consumer confidence readings from the Conference Board released earlier this week. The research group’s U.S. consumer confidence index rose to 81.4 this month, the highest since January 2008.
Household expenditures, however, have remained sluggish despite improving optimism. Consumer spending grew at an annualized 2.6 percent in first quarter, faster than the 1.8 percent pace in the last three months of 2012 but slower than an earlier government estimate of 3.4 percent.
The barometer of current economic conditions ended at 93.8 in June, down from 98.0 in May. This was above an early June reading of 92.1 and economists’ forecast of 92.8.
The survey’s gauge of consumer expectations ended June at its highest level since October at 77.8, up from 75.8 in May. The latest reading was stronger than the preliminary June figure of 76.7. Economists had projected a late-June figure of 77.0.
Other areas of the U.S. economy have been uneven, which economists have blamed on higher taxes and federal budget cuts. Weak overseas growth especially in China has been a drag on business activities and hiring, economists say.
The Institute for Supply Management-Chicago said its index on Midwest business activity posted a steeper-than-expected drop in June to 51.6. A reading below 50 points suggests business contraction.
“It’s not firmly in expansion territory where businesses are ready to hire and invest,” said Tim Quinlan, an economist with Wells Fargo Securities in Charlotte, North Carolina.
There was a divergence in outlook between higher-income families and lower-income ones, according to the latest Thomson Reuters and University of Michigan consumer survey.
Higher-income households showed increased optimism about their incomes and wealth, while lower-income ones reported less optimism. Families in the top third income bracket were the most optimistic since the June 2007 survey.
Rising home and stock prices likely bolstered sentiment among wealthier families, although gains on Wall Street were reduced by a recent market sell-off due to worries that the Federal Reserve might pare its $85 billion monthly bond purchases later this year.
Still, the Standard & Poor’s 500 index is currently up 2.1 percent for the quarter and 12.4 percent for the year, its best first-half performance since 1998, though it is on track for its first monthly loss since October.
Domestic single-family home prices posted their biggest annual gain in seven years in April, according to data from S&P/Case Shiller released on Tuesday.
The survey’s one-year inflation expectation ended June at 3.0 percent down from 3.1 percent in May and from the 3.2 percent in early this month.
The survey’s five-to-10-year inflation outlook ended unchanged at 2.9 percent for a third straight month. It dipped from 3 percent in early June.
Reporting by Richard Leong; Editing by Chizu Nomiyama