Confidence Index at a 2-Year High
U.S. consumer confidence surged to a two-year high this month on hiring hopes, while new-home sales in June posted a smaller decline than expected, according to two reports Tuesday that signaled that the economy might be picking up after a brief hiatus.
The Conference Board, a private forecasting group, said its consumer sentiment gauge climbed in July for the fourth straight month to 106.1 from an upwardly revised 102.8 in June, outpacing Wall Street forecasts.
“These are strong numbers. I have no doubt they indicate continuity for the economic expansion and are a prelude to a second half that is stronger than the first half,” said David Littmann, chief economist at Comerica Bank.
A separate report from the Commerce Department showed that sales of new homes dipped to a seasonally adjusted annual rate of 1.326 million units last month, down 0.8% from a downwardly revised but still record pace of 1.337 million in May.
Helped by low interest rates and tight inventories that are sustaining home buyers’ appetites, the housing sector has consistently defied economists’ expectations for a falloff.
Inventories of homes for sale held steady at a record-low 3.4 months’ supply for the second straight month.
The new-home sales number comes a day after the National Assn. of Realtors reported that sales of existing homes showed an unexpected jump to a record high last month.
Analysts said the confidence rise lent weight to Federal Reserve Chairman Alan Greenspan’s assertion last week that recent weakness in the economy would prove short-lived.
“Consumers are feeling better not only about current conditions but also about prospects for the future. It looks as if a lot of people believe that business conditions are holding their own and doing better than a year ago,” said Gary Thayer, chief economist at A.G. Edwards & Sons.
Consumer faith in the economy is often seen as a proxy for future spending, although some economists and Fed officials contend that the correlation is not always exact.
Those surveyed expressed more optimism about the job market, which could help President Bush as he heads toward the November elections.
The percentage of consumers who said jobs were hard to get dipped to 26.0 from 26.2, and those saying work was plentiful increased to 19.8 from 18.3.
The present-situation index rose to 106.5. from 105.9 in June, and the expectations index soared to 105.8 from 100.8.
According to the Commerce Department report, new homes sold fastest in the South, where sales jumped 9.6% to a record-high 696,000 rate. They fell 13.1% to 338,000 in the West, 2.9% to 201,000 in the Midwest and 14.2% to 91,000 in the Northeast.
