Consumer Confidence Sags; Existing-Home Sales Rise

Consumer confidence grew more pessimistic for the second straight month, a private business group said Tuesday, undermining other recent signs that the recession may be nearing an end.

But in a conflicting report, the National Assn. of Realtors reported that low mortgage rates spurred a 3.4% jump in U.S. existing-home sales in April, bringing the pace of sales to its highest level since last August.

In California, existing-home sales also continued to rebound from a two-year slump with an 11.8% gain in April over March for the third consecutive monthly gain, according to a California Assn. of Realtors report.

The Conference Board, a business research group, said its monthly index of consumer confidence registered 74.2 in May, down from 79.4 in April.

In March, after the end of the Gulf War, the index shot up to 81.1, its highest level since last September. The index is based on a 1985 reading of 100.

This month’s survey found that people were increasingly nervous about the economy and less optimistic in their outlook for the future. Buying plans were moderately weaker in May.

The monthly survey of 5,000 American households found that about 38% believe that current business conditions are bad, up from 36% last month. Only 11% said they were good.

There was also a rise in concern about unemployment. A total of 38.6% of respondents said jobs were hard to get in May, up from 35.5% in April. Less than 10% said jobs were plentiful.

Consumers’ plans to buy cars, which rose in April, fell in May, the survey found. Car-buying plans continue to run well below year-ago levels.

Intentions to buy a home fell for the second straight month, after posting a good gain in March. Plans to acquire a major appliance also remain weak, the Conference Board said.

In the home sales report, the NAR reported that sales rose in all the regions of the country except the Midwest, where sales had been unusually strong in March. In the Northeast, where the recession has wreaked havoc on real estate markets, sales soared by 12.2% in April, the realtors said.

“Lower interest rates are bringing people back into the market,” John Tuccillo, NAR’s chief economist told Reuters. The slump in the Northeast “clearly has bottomed out” and “sales are beginning to creep upward,” he added.

The NAR said the sales rate for single-family homes rose to an annual rate of 3.33 million units, up from 3.22 million units in March.

In California, the upturn, which followed gains of 13.6% and 4.3% in February and March, represented a slim 0.7% decline from the pace of home sales in April, 1990, the California Assn. of Realtors said.

Existing-Home Sales Seasonally adjusted annual rate, millions of units April, ‘90: 3.37 March, ‘91: 3.22 April, ‘91: 3.33 Source: National Assn. of Realtors

Consumer Confidence Index From a monthly survey of 5,000 U.S. households 1985 equals 100 *April, 1991: 79.4 **May, 1991: 74.2 *Revised figure **Preliminary figure Source: Conference Board