Consumer Confidence Index Increases
Tuesday, July 25th 2000, 12:00 am
By: News On 6
NEW YORK (AP) â€” Americans are more optimistic about the economy than they were a month ago, a new report said Tuesday, but fewer plan to purchase cars, homes or major appliances â€” an indication they may have concerns about the economic future.
The Conference Board said its Consumer Confidence Index increased to 141.7 in July, a healthy rebound from 139.2 last month but well below the record level of 144.7 measured in January and May. The increase was slightly more than Wall Street analysts were expecting.
``I think consumers are feeling good about things now, but there are concerns about the economy going forward,'' said Gary Thayer, chief economist at A.G. Edwards & Sons Inc. in St. Louis. ``I think they're optimistic but they're not as giddy as they used to be.
``We are seeing signs of the economy slowing down, but this report today will probably keep policy-makers alert that the economy is still relatively healthy, and that they need to be concerned about inflationary pressures,'' he added.
On Wall Street, shares were generally higher. The Dow Jones industrial average was up 40 points to 10,725, while the Nasdaq composite index was up 40 points to 4,022 in late afternoon trading.
The Conference Board index, based on a monthly survey of some 5,000 U.S. households, is closely watched because consumer spending makes up about two-thirds of the nation's economic activity.
Mark Vitner, an economist with First Union Corp. in Charlotte, N.C., said the optimism should translate into strong back-to-school sales and holiday shopping. But he doubts the numbers will carry much weight when the Federal Reserve meets next month to consider if it will hike interest rates again.
The central bank has increased the rates six times in since last summer because of concerns that the U.S. economy was expanding too quickly and could lead to inflation.
``These numbers are just a piece of the puzzle. They're not critical evidence. The Feds are going to be paying attention to the unemployment index and payroll numbers,'' Vitner said. ``Right now we think the Fed will probably remain on hold ... unless we see much stronger employment growth or some sort of a scare in the inflation numbers.''
In testimony before the House Banking Committee Tuesday, Fed Chairman Alan Greenspan said that recent reports have indicated that consumer spending has started to slow in response to the earlier rate increases. But he said it was too soon to know whether that slowdown in the spring was accelerating or whether the economy in the summer was staging a rebound.
``But we will know more at our next meeting and at that time, we will make a judgment'' on what to do with interest rates, Greenspan said. The Fed next meets on Aug. 22.
The business-funded Conference Board survey found that overall, consumers are optimistic about the economy, said Lynn Franco, director of the New York group's Consumer Research Center.
``Consumers are not only optimistic about current conditions, but their expectations for the next six months signal continued low unemployment and minimal inflationary pressures,'' she said.
But the survey also revealed consumers have some doubts.
The percentage of respondents expecting business conditions to improve over the next six months dropped to 16.5 from 18.3 last month, though the proportion anticipating conditions to worsen remained steady at 6.3 percent.
Attitudes towards jobs were also somewhat mixed.
About 17.9 percent of consumers expected more jobs to become available in coming months, compared to 18.2 percent in June. But those expecting fewer jobs to become available dropped to 10.5 percent from 11.6 percent.
Those surveyed were less optimistic their incomes would increase in the near future.
The percentages of Americans who planned to buy a car, home or new appliances also dropped from last month.
Also Tuesday, the National Association of Realtors reported that sales of existing homes rose an unexpected 2.8 percent in June as Americans continued to lock in deals before mortgage rates climb higher.
The stronger-than-expected performance pushed sales of existing single-family homes to a seasonally adjusted annual rate of 5.23 million units, the highest level in 10 months.