US consumer confidence up in June

The US economy is showing signs of improvement

US consumer confidence rose in June to its highest level since February 2008, a survey has shown, suggesting the worst of the recession may be over.

The University of Michigan's index of confidence for this month hit 70.8 from 68.7 in May.

Such a gain has usually indicated "an end to the economic downturn is on the horizon", said the survey's compilers.

Separately, households' savings hit their highest for more than 15 years in May, thanks to the US stimulus package.

The savings rate reached 6.9% - the most since December 1993, after being close to zero in early 2008.

While analysts say higher savings indicate a stronger economy, more consumer spending is required for a sustained recovery.

Spending

Official figures showed consumer spending rose in May for the first time since February .

Consumer spending, which represents around 70% of US economic activity, added 0.3% last month after April's result was revised to a flat reading, the Commerce Department said.

"This confirms our forecast that the economy is going to move into positive territory in the third quarter," said Mark Vitner, an economist at Wachovia.

But he warned that consumer spending would probably fall again during the second quarter.

An increase in social benefit payments thanks to the government's economic stimulus plan helped push up personal income 1.4% in May from April's figure, which was revised upwards to 0.7%.

Factoring in inflation, income after tax increased 1.6% in May, helped by tax cuts.

The University of Michigan survey, carried out jointly with Reuters, said that improved sentiment tends to come as consumers begin to increase their spending on houses, vehicles, and large household durables.

Such data, combined with figures released a day earlier, suggested that the world's largest economy was picking up.

On Thursday, figures showed the economy shrank at an annualised rate of 5.5% in the first three months of 2009, less than previously thought.

It had been estimated that economic output had fallen 5.7%.