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Heightened consumer sentiment levels could boost borrowing

Aug 01, 2013 Philip Burgess

With consumers feeling the most confident in the last six years in July, spending could pick up in the near future. Generally, when consumers spend more, borrowing activity follows suit, which could mean increased demand for short term lending.

The Thomson Reuters/University of Michigan Index on Consumer Sentiment jumped to 85.1 in July, up from an initial reading of 83.9 earlier this month. July's gain was greater than expected, as economists surveyed by Bloomberg called for a slight bump to 84.

"This high level of confidence points toward a continued expansion of consumer spending in the year ahead," said survey director Richard Curtin.

Another positive for consumers moving forward is the bump in the survey's index measuring current economic conditions, which also hit a six year high.

In addition to the rise in confidence, both the improving housing and jobs market could bolster consumer spending in the coming months.

Daniel Bachman, senior U.S. economist at Deloitte, said that consumers have been able to adjust to higher tax rates and the sequester due to these two markets showing signs of recovery.