Consumer confidence rises despite gasoline prices
Consumer confidence bounced back unexpectedly in May, helped by optimism about the job market even as shoppers’ concerns about gasoline price-driven inflation increased.
The New York-based Conference Board said Tuesday that its consumer confidence index rose to 108 in May, up from a revised 106.3 in April. Analysts had expected the reading to fall to 104.5. The May reading was the highest since March, when the index was at 108.2.
“The short-term outlook remains cautious and rising gasoline prices are having a negative impact on consumers’ inflation expectations,” said Lynn Franco, director of the Conference Board Consumer Research Center.
Franco added, “All in all, confidence levels continue to suggest growth, albeit at a slow pace.”
The present situation index, which measures how shoppers feel now about economic conditions, rose to 136.1 from 133.5 in April. The expectations index, which measures consumers’ outlook for the next six months, edged up to 89.2 from 88.2.
Economists closely monitor consumer confidence because consumer spending accounts for two-thirds of U.S. economic activity.
Gary Thayer, chief economist at AG Edwards & Sons Inc., called the Conference Board report encouraging and said that a still-healthy job picture was offsetting shoppers’ worries about higher gasoline prices.
The Conference Board report was good news for retailers, which logged the worst same-store sales performance on record in April. Same-store sales, or sales at stores open at least a year, are considered a key indicator of a retailer’s health.
The weak performance has fueled concerns that gasoline prices and the slumping housing market are eating away at spending. For now, the cutbacks in spending seem to be contained, Thayer said.
Although data released Tuesday gave no clear signs of an end to the housing slump, Thayer said he was confident that consumers could “work through continued weakness in housing” as long as the employment situation remains healthy. Standard & Poor’s housing index Tuesday showed that U.S. home prices fell 1.4% in the first quarter compared with a year earlier, the first time since 1991 that prices have shown a quarterly decline.
On Thursday, the Commerce Department reported that sales of new homes surged in April by the biggest amount in 14 years, but the median price of a new home fell by the largest amount on record. On Friday, the National Assn. of Realtors reported that sales of existing homes fell by a larger-than-expected amount in April, while the median price of a home sold fell for a ninth straight month.
Analysts will be closely watching the Labor Department’s report on employment, to be released Friday. Economists are expecting 140,000 jobs to be added in May and the unemployment rate to remain at 4.5%.
