Consumer confidence rises in July

Published 7:18 am Tuesday, July 26, 2011

NEW YORK (AP) — Americans’ confidence in the economy continues its rollercoaster ride.

As their short-term outlook on jobs and income eased somewhat, U.S. consumers’ confidence rose slightly in July, according to a monthly survey out on Tuesday, but confidence levels still remain weak overall.

The Conference Board’s Consumer Confidence Index edged up to 59.5 in July, from a revised 57.6 in June that marked a seven-month low in the measure. Economists had expected the July figure to fall to 56.

“Overall, consumers remain apprehensive about the future, but some of the concern expressed last month has abated,” said Lynn Franco, director of The Conference Board Consumer Research Center.

A reading of 90 indicates a healthy economy on the index, which measures how Americans feel about business conditions, the job market and the next six months. It hasn’t approached that level since the recession began in December 2007, and a shift of less than five points is generally discarded by economists as insignificant.

Economists carefully monitor consumer confidence because consumer spending accounts for 70 percent of economic activity.

The increase is “a bit bizarre given that all the other measures of confidence have recently fallen,” said Paul Dales, senior U.S. economist with Capital Economics. Last week a Thomson Reuters/University of Michigan survey that also tracks consumer confidence showed the measure fell in July to its lowest level in more than two years.

“Nonetheless, it remains at a level consistent with only modest consumption growth,” he said.

Earlier in the year, Americans were more optimistic that the economy was on track for a recovery. Consumer confidence has fallen since reaching a three-year high in February of 72. It remains below the average monthly reading between November 2010 and May of 2011 of 64.2, said Moody’s chief economist John Lonski.

“Consumers continue to worry about the adequacy of employment opportunities as well as future job opportunities and income growth,” Lonski said.

The job picture has weakened since earlier in the year. The economy added only 18,000 net jobs in June, which was the second straight month of scant hiring. The unemployment rate rose to 9.2 percent, the highest this year. That’s far below the average job gains of 215,000 per month in the February-April period.

Consumers’ short-term outlook improved, according to the index. But their thoughts on current business and employment conditions were worse as labor market concerns persist.

The number of consumers who expect business conditions to improve over the next six months increased, but so did those expecting business conditions to worsen. Those claiming jobs are hard to get increased as well, and the number of people who think jobs are plentiful was unchanged.

The reading is “a reflection that Americans are coping with their circumstances and hoping it doesn’t get any worse,” said C. Britt Beemer, chairman of America’s Research Group. “They don’t see any real growth but they’re able to manage what they’re doing now. ”

Besides job woes, weighing on consumers is a choppy housing market. A report out Tuesday showed home prices in major U.S. cities rose for the second straight month in May, propped up by an annual flurry of spring buyers. But after adjusting for such seasonal factors, prices fell in a majority of markets.

The Standard & Poor’s/Case-Shiller home-price index showed that prices rose in 16 of the 20 cities tracked. Still, 19 of the 20 cities have seen year-over-year price declines.

Meanwhile, gas prices remain high, at $3.69 per gallon (3.8 liters), according to AAA, Wright Express and the Oil Price Information Service. That’s about 14 cents more for a gallon of gas over the July Fourth weekend and nearly $1 more than a year ago.

And household budgets are being stretched by high food prices. Clothing prices are expected to go up this fall as retailers face higher labor costs in China and soaring prices of raw materials like cotton.

The Conference Board survey, conducted by The Nielsen Co., is based on a random survey mailed to approximately 3,000 households from July 1 through July 14. Survey numbers are updated after the month ends.