Over the past few weeks, both the University of Michigan and the Conference Board released consumer sentiment figures for February, which beat economist’s expectations registering strong gains over the month.
The University of Michigan preliminary index of consumer sentiment lifted to 76.3 in February from 73.8 in January. Economists had expected the index to rise to 74.8, according to the median forecast in a Bloomberg survey.
Similarly, the Conference Board, an industry group, said consumer sentiment rose sharply to 69.6, from a downwardly revised 58.4 in January, easily beating economists’ expectations of 61. It was also the highest level since November.
Both measures of consumer sentiment appear to be in a gradual uptrend after bottoming-out during the Global Financial Crisis (see next chart).
As noted previously, there appears to be a strong correlation between consumer sentiment and US house prices, with sentiment typically the leading indicator. As such, it is probably not surprising that US house prices, as measured by the monthly 20-city Case-Shiller Index, rose again in December 2012 to be up by 6.9% over the year – the highest annual rate of growth since mid-2006 (see next chart).
The lift in consumer sentiment and house prices also augers well for US housing construction, with US housing starts seemingly following house prices higher, lifting by 24% in the year to January 2013 (see next chart).
Provided negotiations over the US debt ceiling and budget sequester don’t unravel into a disorderly mess, US consumer sentiment and the housing market look set to continue their path to recovery over 2013.
