The belief of an economic recovery might just have got
stronger with consumer confidence hitting a multi-year high. A
recent report by Conference Board data suggested the Consumer
Confidence Index improved to 81.4 in Jun 2013 from a revised 74.3
in May 2013.
The index notched its highest level since Jan 2008, when it
had touched 87.3. This prompts a sense of optimism about a steady
increase in consumer spending going forward.
A recovery in the housing market, stock prices gaining
momentum and improving labor market condition played vital roles
to help the consumer confidence move north.
According to Census Bureau and Department of Housing and Urban
Development, sales of new houses jumped 2.1% sequentially in May
2013 and surged 29% from May 2012. Additionally, unemployment
rate is currently hovering around 7.6%, reflecting an improvement
from 7.9% in the beginning of the year. Alongside, S&P 500
has scored roughly 9%, while Dow Jones Industrial Average has
gained approximately 10% so far this year.
So, does this invoke enough confidence to say that the economy
is back on growth trajectory? Although the data on the table
shows that derailed economy is gradually making a comeback, it
wouldn't be prudent to jump the gun.
Fed officials hinted at gradual rollback of $85 billion
monthly stimulus program in the later part of the year and said
that they might discontinue the program by the middle of next
year if economy improves further.
Fed officials look quite optimistic about pulling the
unemployment rate down to a range of 7.2% to 7.3% in 2013 with
expected economic growth of 2.3% to 2.6%. Next year they further
intend to restrict the unemployment rate to between 6.5% and
6.8%, and boost economic growth to 3% - 3.5%.
As for the broader economy, we need to wait and see whether
the Fed's move is in the right direction or the economy outcries
for more. But if everything goes well and consumer confidence
further rises with improving economy, then we could see a spur in
demand with willingness to shell out more. Consumers' confidence
is a key determinant for the economy's health with consumer
spending accounting for over two-thirds of U.S. economic
This could prove to be a boon for retail companies, which have
been actively making efforts to win the hearts of bargain
Best Buy Co. Inc.
) could witness more foot traffic in their stores with consumers
searching for products from bellwethers including
). Also, look for more people shopping in stores such as
L Brands, Inc.
The Gap, Inc.
Let's hope the prevailing confidence in the air remains
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