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U.S. Consumer Confidence at 4-Year High : Economy: The sale of new homes rose 4.2% during May as interest rate worries were tempered.

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From Times Wire Services

Americans’ confidence in the economy is at its highest level in nearly four years, according to a business group survey released Tuesday.

At the same time, the government reported that sales of new homes increased sharply in May despite the effects of higher mortgage interest rates.

The Conference Board said its consumer confidence index jumped to 92 in June, compared to a revised 88.9 in May. May’s reading was originally reported at 87.6. The confidence index hasn’t been as high since its 101.7 level in July, 1990.

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In the latest survey, the Conference Board said consumers’ assessment of prevailing economic conditions registered a “good gain,” but expectations for the months ahead were only marginally more positive than in May.

Economists had expected a June reading of 89.2.

The consumer confidence survey, compiled monthly by the private business group in New York, is based on a representative sample of 5,000 U.S. households. It is based on an index of 100 in 1985.

In the survey, slightly more respondents in June than in May described business conditions as “good.”

Regarding jobs, however, less than 30% of the respondents said they are “hard to get,” although the number reporting jobs are “plentiful” continued to be low.

Job creation continues to be the focal point for consumers, the survey noted, but Michelle Colley Laughlin, an economist at Sanwa Securities, said individuals’ job concerns appear to have relaxed somewhat.

“The Conference Board survey is the consumer sentiment gauge most closely correlated with employment, and it supports our forecast for strong jobs growth in June,” Laughlin said.

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The Departments of Commerce and Housing and Urban Development reported that new home sales rose 4.2% in May to a seasonally adjusted annual rate of 738,000 units and were a strong 16% higher than levels a year earlier, when they were at a 635,000-unit rate.

Analysts said the effects of higher mortgage rates, which sent new homes sales lower in April, were tempered by growing consumer confidence in the economy.

Still, many analysts said sales may have reached their 1994 peak and will taper off while remaining at the highest level in eight years.

Economist David Lereah of the Mortgage Bankers Assn. said he suspects the housing market gave its best shot in May, when sales rose 4.2% despite the most expensive mortgages in two years.

Sales totaled 738,000 at a seasonally adjusted annualized rate, up from a revised 708,000 in April, the departments reported.

Consumer Confidence

From a monthly survey of 5,000 U.S. households

Index: 1985=100

June, 1993: 58.6

June, 1994: 92.1

Source: The Conference Board

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