US consumers turned much more upbeat in June, helped by some relief in gasoline pump prices and a rising stock market, a report showed on Friday. Separately, government data showed the current account deficit, the broadest measure of US trade with the rest of the world, hit a record high on the first quarter. The University of Michigan's closely watched measure of consumer sentiment surged to 94.8 from 86.9 in May, its highest since January. Wall Street's median forecast was 89.0.
Assessments of current conditions and future expectations both advanced strongly, and the index outperformed gains in other sentiment indicators released recently.
"Households feel better about the economy because of the recent slide in gasoline prices and increases in equity markets," said Steven Wood, economist at Insight Economics.
Economists said the day's reports further cemented expectations the Federal Reserve would press on with its program of rate increases.
World oil prices pulled back during May, while US equity prices rose strongly from mid-May through early June, when the Michigan sentiment survey was compiled. Some economists cited continued low mortgage rates as another boost for consumers.
Consumer spending accounts for two-thirds of overall US economic activity, and any improvement in confidence could bode well for a pickup in growth.
"I think we are beginning to see a shift in the tempo of the expansion. Other variables have indicated that lately. We may see an acceleration," said Bill Hummer, chief economist at Wayne Hummer Investments.
Still, with energy prices accelerating again, some worried that consumer sentiment could take a fresh hit.
"We are a bit nervous that the rebound in oil prices in the past couple of weeks will lift retail gas prices, dampening sentiment," said Ian Shepherdson, chief US economist at High Frequency Economics in Valhalla, New York.
TSUNAMI AID SUSPECTED IN CURRENT ACCOUNT JUMP: The US current account deficit hit a record $195.1 billion, the Commerce Department said, driven by a growing merchandise trade gap and an increase in unilateral transfers, such as US aid for victims of the tsunami in south Asia in late December last year.
The quarterly shortfall overshot Wall Street expectations for a $190 billion deficit. The Commerce Department also revised the current account deficit for 2004's fourth quarter to $188.4 billion from $187.9 billion reported previously.
The deficit ran at a record 6.4 percent of gross domestic product in the first quarter, considered by many economists to be an unsustainably high level.
The central bank next meets on June 29-30, and is expected to raise benchmark rates by one-quarter percentage point in what would be the ninth hike in the current cycle.
The first-quarter decline in the current account reflected an increase in the goods deficit to $186.3 billion.
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