THE DOW hit a fresh record high yesterday and the dollar soared against the euro and the yen, after upbeat US surveys showed consumer confidence is on the up and raised hopes that property prices are finally set to recover.
Consumer confidence strengthened in May to its highest level since early 2008, according to the Conference Board, suggesting Americans’ attitudes were resilient in the face of government budget cuts.
The industry group’s index of consumer attitudes jumped to 76.2 from an upwardly revised 69 in April, its highest reading in more than five years.
The widely watched S&P/Case Shiller house price index for March also rose sharply, climbing 10.9 per cent year-on-year and marking the biggest jump since April 2006, right before the peak of the US property bubble.
Prices in the 20 cities surveyed increased by 1.1 per cent in March compared to the month before on a seasonally adjusted basis, meaning prices are up 3.9 per cent over the first quarter of 2013, stronger than the 2.4 per cent gain seen in the final quarter of last year.
Analysts at Capital Economics played down fears of a fresh bubble.
“Talk of a house price bubble seems premature ... Even after the rapid gains of the past 12-18 months, average US home prices are just three-quarters of their previous peak,” said Ed Stansfield.
We suspect that the demand/supply balance will continue to normalise and that, as a result, the pace of home price gains will moderate in the second half of this year.”
There was also good news for the country’s banks. For the first time in five years ratings agency Moody’s has outlook for the US banking industry from to stable from negative, where it has been stuck since the height of the financial crisis.
The Dow Jones gained 0.69 per cent to a record 15,409.39 at the close, while the S&P 500 added 0.63 per cent, to finish at 1,660.06.