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Consumer sentiment perks to one-year high

July 15, 2005

NEW YORK (Reuters) – U.S. consumer sentiment rose to its
highest level in a year in early July as gains in the stock
market and better hiring conditions offset the drag from record
gasoline prices, a report said on Friday.

The University of Michigan said its measure of confidence
inched up to 96.5 so far this month from 96.0 in June,
according to market sources who saw the subscription-only
report. Analysts had been looking for a dip to 95.0.

“There is good enough news out there to keep consumers
feeling good about the economy,” said Michael Jansen, currency
strategist at National Australia Bank in New York.

The survey’s expectations component ticked up to 86.6 from
85.0, while perceptions of current conditions eased to 112.0
from 113.2.

Consumer spending accounts for two-thirds of overall U.S.
economic activity, and any improvement in confidence is seen as
a possible precursor to stronger growth.

However, in recent years the correlation between confidence
and retail sales has weakened, with consumers buying new cars
and homes in earnest even as they tell surveys that things are
getting worse.

Indeed, while confidence levels remain near their recent
average, retail sales surged 1.7 percent in June as car dealers
made vehicle purchases more attractive through aggressive
discounts.




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