Consumer Confidence High, But Most Expect Higher Interest Rates

Consumer Confidence High, But Most Expect Higher Interest Rates Consumer confidence — which is often associated with a willingness to spend more — reached its highest level in six years in a highly-monitored survey this month.
This was the third consecutive month that consumer confidence has been higher than in any prior month since the July 2007 survey, according to the Thomson Reuters/University of Michigan final index for July 2013.
However, interest rates were expected to increase in the year ahead by 68 percent of all consumers in July, up from 55 percent in June — twice as frequently as the 33 percent recorded last July.
That’s the highest proportion to expect interest rate hikes since August of 2006
Mortgage rates have shot up over 4 percent in recent weeks as the markets anticipate a winding down of the Federal Reserve’s stimulus program, although rates have eased in recent days as Fed officials have reassured lawmakers that caution will prevail in their strategy.
“The anticipated increases in interest rates dimmed longer term prospects for the economy, but acted to accelerate consumers’ buying plans,” said the Survey of Consumers summary released Friday by Thomson Reuters/University of Miching.
Among households with incomes of $75,000 or more, more than 25 percent cited the advantage of buying homes before prices or interest rates increased in July, up from just 6 percent last July.
“Fewer consumers judged current vehicle buying conditions negatively than anytime since August 2005,” the report said.
Rising stock market holdings and home values continue to bolster confidence, especially among higher income households.
Home values were reported to have increased by the highest proportion of homeowners in the past six years.

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