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Michigan Consumer Sentiment Index Was Unchanged in February

Feb. 14 (Bloomberg) -- Consumer confidence in the U.S. was stronger than projected in February as Americans grew more upbeat about the economy.

The Thomson Reuters/University of Michigan preliminary index of sentiment held at 81.2 this month. The median estimate in a Bloomberg survey of economists called for a decline to 80.2. A gauge of the economic outlook improved to the highest level in six months.

The reading indicates consumers may pick up the pace of spending after a winter-related slowdown in January. Higher stock prices and home values are helping bolster household finances, underpinning sentiment at a time when the labor market is struggling to improve.

“Consumers remain fairly upbeat about their economic outlook,” Millan Mulraine, deputy head of U.S. research and strategy at TD Securities USA LLC in New York, said before the report. “It could certainly point to a meaningful rebound in activity in the coming months.”

Estimates of the 74 economists in the Bloomberg survey ranged from 76.5 to 86. The index averaged 89 in the five years before December 2007, when the last recession began, and 64.2 in the 18-month contraction that followed.

Another report today showed factory production unexpectedly declined in January by the most since May 2009, adding to evidence severe winter weather weighed on the economy.

The 0.8 percent decrease at manufacturers followed a revised 0.3 percent gain the prior month, figures from the Federal Reserve showed today in Washington. The median forecast in a Bloomberg survey called for a 0.1 percent advance.

Consumer Expectations

The Michigan sentiment survey’s index of expectations six months from now increased to 73 from 71.2 last month. The gauge of current conditions, which measures Americans’ view of their personal finances, fell to 94 in February from 96.8 a month earlier.

Other measures of consumer sentiment have been mixed. The Bloomberg Consumer Comfort Index rose for the first time in five weeks in the period ended Feb. 9. The New York-based Conference Board’s measure of sentiment climbed in January to a five-month high.

Inclement weather has been at least partly to blame for a slowdown in spending. This month’s storm follows the coldest January since 1994 in the contiguous U.S., based on gas-weighted heating-degree days, a measure of energy demand, according to Commodity Weather Group LLC in Bethesda, Maryland. The Northeast is also on track for the coldest winter since 1982, measured from December to February, the group said.

A report yesterday from the Commerce Department showed retail sales declined in January by the most since June 2012. The drop in sales was broad-based, with nine of 13 major categories showing declines last month, led by auto dealers, sporting goods stores and apparel outlets.

Labor Market

Spending has also been restrained by weakness in the labor market and limited income growth. More Americans than projected filed applications for unemployment benefits last week, a Labor Department report showed yesterday. Jobless claims increased by 8,000 to 339,000.

Payrolls increased 113,000 in January after climbing 75,000 a month earlier, the weakest back-to-back gain in three years, Labor Department figures showed Feb. 7. Average hourly earnings rose 1.9 percent in the year ended last month, matching December as the weakest since July 2013.

Disposable income, or the money left over after taxes, fell 0.2 percent in December after adjusting for inflation from the prior month, the biggest decrease in almost a year. Over the past year, it dropped 2.7 percent, the largest annual decline since November 1974, underscoring the impact of the expiration of the payroll tax break, the increase in some income taxes earlier last year and weak wage gains.

Economists’ Forecasts

Economists at Goldman Sachs Group Inc., Credit Suisse and Morgan Stanley were among those reducing tracking estimates for first-quarter growth after yesterday’s retail sales figures. In the final three months of 2013, the economy expanded at a 3.2 percent annualized rate as consumer spending rose the most in three years.

Higher stock and home values may help underpin spending. The S&P/Case-Shiller index of home prices in 20 U.S. cities rose in November from a year ago by the most since 2006. The Standard & Poor’s 500 Index jumped 30 percent in 2013, the most since 1997.

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