Consumer Confidence Rose in August

Consumer Confidence Rose in August
By CHRISTINE HAUSER
Copyright by The New York Times
Published: August 31, 2010
http://www.nytimes.com/2010/09/01/business/economy/01econ.html?hp


Consumer confidence improved slightly in August, according to the latest Conference Board survey, but over all, Americans remain apprenhensive about the economy and the job market.

The Conference Board said Tuesday that its index on consumer confidence rose in August to 53.5 points. It had declined to 51 in July. The rise in the index — which examines how Americans feel about business conditions, the job market and the next six months — was above economists’ forecasts of 50.5. A reading of at least 90 indicates a healthy economy.

“All in all, consumers are about as confident today as they were a year ago,” said Lynn Franco, director of the Conference Board’s consumer research center. “Expectations about future business and labor market conditions have brightened somewhat, but over all, consumers remain apprehensive about the future.”

Consumer confidence is a closely watched because consumer spending typically accounts for 70 percent of the American economy and is crucial to a sustained recovery.

Americans expected a modest improvement in business conditions and were less pessimistic about job prospects, according to the survey. But the proportion of consumers expecting an increase in their incomes held steady at 10.6 percent.

In a second report on Tuesday, a crucial index on home prices in the United States rose in June, the last month that benefited from a tax credit for home buyers.

The Standard & Poor’s Case-Shiller 20-city home price index, a widely watched indicator, on Tuesday reported a 1 percent rise in June from May, the third consecutive monthly increase.

Nationally, the index rose 4.4 percent in the second quarter of 2010, after having fallen 2.8 percent in the first quarter. Home prices in the nationwide index are 3.6 percent above their year-earlier levels in the three-month period.

But the outlook for the housing prices remains uncertain as excess supply, the flagging job market and other factors weigh on the sector.

Economists said a federal housing credit distorted prices as home buyers took advantage of the credit, which expired at the end of April.

That means the outlook for the rest of the year remains weak with the expiration of the tax credit, as well as the high level of foreclosures and inventories.

“While the numbers are upbeat, other more recent data on home sales and mortgages point to fewer gains ahead,” David M. Blitzer, chairman of the Index Committee at Standard & Poor’s, said in a statement.

“The worry starts when you remember that the home buyers’ tax credit has expired, foreclosures are still at high levels, and July data on home sales and starts were very, very weak,” he said. “The inventory of unsold homes and months’ supply data were particularly troubling. If this relative weakness in demand continues, it will likely filter through to home prices in coming months.”

Still, Mr. Blitzer added, “We recognize that the housing market is in better shape than this time last year.”

Yelena Shulyatyeva, a United States economist for BNP Paribas, said that without employment growth, and in view of the excess housing supply, housing prices should remain under pressure throughout this year and next.

“We do not take this report as a signal of future strength,” Ms. Shulyatyeva said.

Patrick Newport, the United States economist for IHS Global Insight, said he expected declines next year, with the second quarter figures in 2011 to be probably another 8 percent to 10 percent lower from where they are now.

“The key reason is because there is still a big glut of home,” he said, with the second reason the number of foreclosures, followed by a job market that “just isn’t picking up,” he said.

The June numbers basically reflect a three-month moving average. Seasonally adjusted, home prices in June increased 0.71 percent in New York City and 0.02 percent in Los Angeles compared with the previous month.

The Case-Shiller report showed that 17 of the 20 metro areas surveyed registered an increase in June compared with May, according to non-seasonally adjusted data. Las Vegas fell 0.6 percent, with prices there close to their levels in 2000.

Prices in Phoenix and Seattle remained flat.

The housing industry has been buffeted with pessimistic reports in the last week. Both the sale of new homes and existing homes fell declined sharply in July, the first month that buyers could not qualify for a tax credit of up to $8,000.

A report from the National Association of Realtors said sales of existing homes in July fell 25.5 percentfrom the month a year ago to a seasonally adjusted annual sales rate of 3.83 million. That was the lowest rate of sales, which include houses, condos, co-ops and town houses, since 1999.

And the Commerce Department reported that sales of new homes in July fell 12.4 percent from June, to a seasonally adjusted annual rate of 276,000 units. That was the lowest level in July since the government began keeping track in 1963

Analysts surveyed by Thomson Reuters had expected sales to be flat in July from June.

The report also said the median sales price was $204,000 in July, down 6 percent from June and 4.8 percent from July 2009. The average sales price was $235,300 in July, down 3.1 percent from June.

A report on pending home sales is scheduled to be released on Thursday.