Consumers felt good about the economy according to the survey made by Thomson Reuters/ University of Michigan. Its consumer sentiment index went up to 85.1, which is the highest level since 2007. The reading last month was 84.1. The index has increased 17.7 percent in the past year.
The report indicated that more than two-thirds of consumers have expected interest rates to increase, as compared to 55 percent in June. Mortgage rates have softened in recent weeks. The survey said that over 25 percent of respondents with household incomes higher than $75,000 saw the benefits of keeping low rates at present compared to just 6 percent in the same month last year.
While consumers are optimistic about the future, the driving force behind the economy is consumer spending. It increased 0/3 percent in May according to the latest report from the Bureau of Economic Analysis. Consumer spending for June is scheduled to be released on August 2.
Analysts said that the increase in consumer spending didn’t result to increase spending. They saw a divergence in the showing of different brackets of consumers. High income consumers got good wages and profits from investing in the stock market. Lower income consumers are not doing as well as the first group.
According to the SPDR Retail, ETF is 31 percent higher compared to last year. It showed that a more confident consumer drives up the retail sector. SPDR S&P 500 has a 19.5 percent return. The Consumer Discretionary SPDR increased 26 percent this year.
But the stock market was not affected by the increase of consumer sentiment. The three major benchmarks closed lower than the previous day. The Dow Jones Industrial Average fell 94 points to 15,456. The Standard & Poor’s 500 Index dropped 6 points to 1,684. The Nasdaq declined by 5 points to 3,600.