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Consumer confidence soars to 5-month high

June 26, 2015, 6:13 PM UTC
July Retail Numbers Weaker Than Expected
SAN FRANCISCO, CA - AUGUST 13: Shoppers carry bags from Victoria's Secret on August 13, 2014 in San Francisco, California. According to a Commerce Department report, July retail sales increased by 0.1 percent, falling short of economist expectations. (Photo by Justin Sullivan/Getty Images)
Photograph by Justin Sullivan — Getty Images

Americans might be finally ready to shop again.

The University of Michigan reported Friday that its widely watched consumer sentiment index jumped to 96.1 in June. That puts the index, which is now at a five-month high, 16.5% above where it was a year ago.

The 96.1 was also better than expected. Economists polled by Bloomberg predicted the index would come in at 94.6.

The consumer confidence index looks at shoppers’ attitudes about the national economy and buying conditions. But don’t get too excited. Numerous studies have shown the consumer confidence figure accurately reflects the current state of the economy, but is pretty much worthless in predicting where the market is heading. Economists typically call it a lagging indicator.

Recently, the index hasn’t been doing even that great a job of tracking consumer spending. Despite the recent rise in consumer confidence, retail spending has been mixed. Walmart (WMT) for example, reported disappointing earnings in its first quarter. Sales at Home Depot (HD), though, were better than expected. Last week, the Gap announced it shutter 175 of its namesake stores.

The improvement in consumer confidence, though, follows other news that suggests the economy is improving from its sluggish start this year. Earlier this week, the U.S. Census Bureau announced new home sales hit their fastest pace since February of 2008. Consumer spending also rose in May. Next Thursday, the Labor Department will report monthly jobs figures for June.