Consumer Confidence Index ticks up to 53.5, but mood still gloomy amid job worriesBy AP
Tuesday, August 31, 2010
Americans’ economic confidence ticks up slightly
NEW YORK — Americans’ confidence in the economy improved slightly in August from July, but they’re still roughly as gloomy as a year ago.
The downbeat sentiment underscores the challenges ahead for the increasingly shaky recovery and for retailers, which are grappling with a weak start to back-to-school shopping. Worries are even growing about the critical holiday shopping season.
The Conference Board, a private research group, said Tuesday that its Consumer Confidence Index rose to 53.5 from a revised 51.0 in July. Economists surveyed by Thomson Reuters had expected 50.5. The increase comes after two straight months of declines.
“The consumer is still struggling, and the prospects look like more of the same,” said Ken Perkins, president of research firm RetailMetrics.
An index of 90 or more indicates a healthy economy. That level hasn’t been approached since the recession began in December 2007. The index — which measures how Americans feel about business conditions, the job market and the next six months — had been recovering fitfully since hitting an all-time low of 25.3 in February 2009.
In August 2009, the index stood at 54.5, only a point higher than now. Since then, it has mostly hovered in a tight range between the mid-40s and the high 50s. May 2010 proved to be the only exception, at 62.7 — still weak.
Moreover, there doesn’t seem to be any catalyst in sight to get them to feel better any time soon. Home sales are plunging, and consumers are saving more and spending less as the unemployment rate remains stuck at almost 10 percent, all contributing to weak confidence.
Shoppers are increasingly waiting for the best deals and buying only fashions that they can wear right away. Perkins estimates that August retail sales were at best slightly better than last year, which was weak. Major retailers report August revenue figures Thursday.
Economists watch confidence closely because consumer spending accounts for about 70 percent of U.S. economic activity and is critical to a strong rebound. But worries are rising the economy is growing too slowly to support sustained job growth. Some are concerned it could fall back into a recession.
“The comfort … is that confidence did not fall further,” Paul Dales, U.S. Economist at Capital Economics, said in a statement. “But there are few signs that households will ramp up their spending. High unemployment, widespread negative housing equity and low share prices are keeping households on the sidelines.”
Investors seized on the bigger than-expected increase. The Dow Jones industrial average got a boost early in the day on the figure, though the Dow Jones Industrial average finished just 4.99 points higher by the end of the day. Stocks have been pummeled all month by uncertainty over signs of slowing growth.
Tuesday’s regional manufacturing report was another one of those signs. The drop in the Chicago Purchasing Managers Index was similar to declines seen in other regional manufacturing reports earlier this month.
The slight uptick in August’s confidence figures was a result of Americans’ improved outlook over the next six months, which is one component of the index.
Still, “employment concerns continue to heavily weigh on consumers’ attitudes,” Lynn Franco, director of The Conference Board Consumer Research Center, whose random survey was mailed to 5,000 households Aug. 1 to Aug. 24.
Meanwhile, a home price index showed prices rose in June for a third straight month as now-expired tax credits inspired a burst of home buying. But prices are expected to fall the rest of the year now that demand has faded.
The Standard & Poor’s/Case-Shiller 20-city home price index, released Tuesday, posted a 1 percent increase in June from May and was up 4.2 percent from a year ago. Home prices nationally rose 4.4 percent in the second quarter compared with the first quarter. That was largely because buyers could take advantage of government tax credits of up to $8,000.
Home sales have dropped sharply since those incentives expired. Last week, the National Association of Realtors said sales of previously occupied homes in the U.S. fell 27 percent in July, the weakest showing in 15 years.
The minutes from the Federal Reserve board of governors’ Aug. 10 meeting showed that the bank recognized the economy might need further stimulus beyond purchases of government debt. Some members of the Fed’s policy-setting committee acknowledged the economy had softened more than they had anticipated.
Economists will closely watch Friday’s August employment report. They’re expect another month of tepid hiring by the private sector.
AP Real Estate Writer Alan Zibel in Washington contributed to this report.
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