A key index of US consumer sentiment improved in early July, market sources said today, and analysts attributed this uptick to recent tax cuts and a Federal Reserve rate cut in late June.
The University of Michigan's preliminary consumer sentiment index, a widely followed measure of consumers' mood, rose to 90.3 in July from a final reading of 89.7 in June, market sources said. That was a touch higher than economists' forecasts for a reading of 90.0.
"All of the increase was due to a sharp rise in the current conditions index which probably occurred due to the implementation of the recent tax cut law," said Mr Patrick Fearon, economist at A.G. Edwards & Sons in St. Louis, Missouri. "The Fed rate cut (in late June) probably was a help as well."
US financial markets showed no reaction to the data.
The survey's preliminary current conditions index, which tracks consumers' views about their present financial situation, jumped to 102.8 in July from 94.7 in June, market sources said.
"People have a sense that government policy in general is geared toward getting the economy going," Mr Fearon said.
A slip in the expectations index - which measures attitudes about the 12 months ahead - to 82.7 in July from 86.4 in June, may have been due to the rise in the June unemployment rate to 6.4 percent, reported on July 3rd.
"Even people who are not laid off now could be getting concerned that they might be laid off down the road," Mr Fearon said.
Analysts watch indexes of consumer confidence for clues on consumer spending which has been a pillar of support for the US economy while business spending has been moribund.
The University of Michigan consumer sentiment survey is based on roughly 250 telephone interviews with Americans across the country on personal finances and business and buying conditions.