US confidence increases

17 May 2011

WASHINGTON, DC: Consumer confidence has risen in the US, as the economic recovery gains traction and unemployment fears recede.

The May University of Michigan-Thomson Reuters consumer confidence index returned a score of 72.4, up from last month's 69.8.

Just 22% of consumers polled for the index said that they expected US unemployment to increase over the next 12 months - the lowest proportion for over two decades.

Labour market weakness has weighed on consumer confidence in recent months.

Latest government figures show that the overall unemployment rate stands at just under 9%. But overall payrolls in the US were found to have risen by 244,000 last month, signalling better conditions ahead.

Analysts said that high petrol prices are likely to be a major threat to consumer sentiment over the next few months.

Cary Leahey, an economist at Decision Economics, told Reuters: "You can't say the consumers are rolling over. But they are spending about 6 percent of their total spending on energy.

"That's a share that has traditionally been a recession marker for the US economy."

Meanwhile, a separate report in the Financial Times has highlighted increased investor demand for shares in US companies that produce luxury goods and services - in another signal the nation's economy is returning to health.

Popular shares include those for yoga products manufacturer Lululemon Athletica, high-end grocers Whole Foods and cosmetics giant Estée Lauder.

With their high incomes, wealthier consumers are better-positioned to deal with fluctuating petrol prices.

Commenting on the equities trend, David Palmer at UBS, an investment bank, said: "They [investors] are betting on the higher-income folks; the 'upstreamers', as Heinz calls them, the people who can afford the finer things in life."

As reported on Warc News yesterday, P&G, one of the largest US advertisers, also sees "spots of light" in its mature markets of US and Western Europe, from where it derives two-thirds of sales.

"We're seeing consumers across all price tiers continuing to have a strong preference for branded products, which wasn't necessarily the case in the depths of the recession," Jon Moeller, Procter's cfo, told the Consumer Products Symposium last week.

Data sourced from MarketWatch/Reuters/Financial Times/Warc; additional content by Warc staff