Consumer Confidence Strengthens in June

U.S. consumer confidence strengthened in June, with shoppers responding to an improved outlook for the job market as they shook off the most recent rise in gasoline prices, a report showed Tuesday.

Separate data showed that weekly chain-store sales perked up as high temperatures drove demand for seasonal items such as clothing and air conditioners, but a regional index covering economic activity in part of the Middle Atlantic region showed weakening factory activity.

The reports, coming the day before the Federal Reserve starts a policy-setting meeting, fit in with financial markets’ expectations that the central bank would raise interest rates by a quarter of a percentage point.

The Conference Board’s consumer confidence index rose to a three-year high of 105.8 in June from 103.1 in May, outpacing Wall Street’s forecast of 104.0.

Measures of both the present situation and expectations for six months hence rose solidly.

The “jobs hard to get� index dropped to 22.6 from 24.1 a month earlier, a positive sign, although the index of those ranking jobs as plentiful eased as well.

“The employment situation looks relatively well as the jobs-hard-to-get component improved, suggesting the labor market is healthy,� said Steve Saldanha, chief currency strategist at TD Securities in Toronto.

The confidence report pushed U.S. equity prices higher and knocked down Treasury bond prices, which have risen recently on worries that growth might be slowing.

Some analysts worried that consumer confidence could be hit next month if gasoline prices continue to climb at a time many Americans are hitting the road for their summer vacations.

But for now, consumers seem to be taking oil prices in stride.

“Raw confidence being resilient in the face of $60-per-barrel oil bodes well for the U.S. economy,� Saldanha said.

Consumer spending is the backbone of the U.S. economy, accounting for about two-thirds of overall activity. It has held up in recent years even at times when Americans’ mood has turned glum, and greater levels of confidence could well tease out some additional spending.

“At this level the index is consistent with spending growth of about 3.5%, in line with recent hard data,� said Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, N.Y.