Consumer Confidence Falls in June

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NEW YORK (June 30) - Americans — whose hope for the economy had been rising since March — unexpectedly lost faith this month, pushing down a widely watched barometer.

The New York-based Conference Board said Tuesday that its Consumer Confidence Index now stands at 49.3, down from its revised May level of 54.8.

Because consumer spending accounts for more than two-thirds of economic activity in the United States, economists and investors watch it closely.

The Dow Jones industrials fell more than 100 points Tuesday morning to the 8,400 level, reversing earlier gains after the conference board released its report. But a key housing index released Tuesday showed home price declines moderated in April.

Both components of the consumer confidence gauge fell this month. The Present Situation Index of how shoppers feel now about the economy declined to 24.8 from 29.7 in May. And the board's Expectations Index, shoppers' outlook for the next six months, dropped to 65.5 from 71.5.

Lynn Franco, director of The Conference Board Consumer Research Center, said in a statement that the decline in consumers' current view implies "that economic conditions, while not as weak as earlier this year, are nonetheless weak."

Economists surveyed by Thomson Reuters had projected confidence would hold steady at 55 this month after surges in April and May helped by a stock market rally that has shown signs of fizzling.

Consumer sentiment has risen markedly from its new historic low of 25.3 in February. But confidence is still well below what's considered healthy. A reading above 90 means the economy is on solid footing. Above 100 signals strong growth.

In May, the figure zoomed 14 points past economists' expectations to its highest level since September, when it was 61.4. Economists surveyed by Thomson Reuters had expected a reading of 42.3.

But that rise hasn't translated into relief for merchants, who continue to struggle with weak sales. In fact, stores are aggressively discounting summer inventory to keep it moving. And retail sales could falter further if shoppers keep worrying about economic security as the critical fall selling season begins.

Though a housing rebound is far away, the Standard & Poor's/Case-Shiller index of 20 major cities tumbled by 18.1 percent, the third consecutive month the decline was not a record. And yearly losses in 13 metros improved compared to March.

The 20-city index is off almost 33 percent from its peak in the second quarter of 2006, which means home values are now around 2003 levels. The 10-city index fell 18 percent from the year before.

Job security — a key factor in shoppers' willingness and ability to spend — continued to plague consumers. Responding to the Conference Board's mail survey of 5,000 households from June 1 through June 23, 44.8 percent of consumers said jobs are "hard to get," up from 43.9 percent in May. Those saying jobs are "plentiful" decreased to 4.5 percent from 5.8 percent.

U.S. shoppers anticipating more jobs in the months ahead decreased to 17.4 percent from 19.3 percent, while those anticipating fewer jobs increased to 27.3 percent from 25.6 percent. The proportion of consumers responding to the survey who expect their incomes to rise in the next six months declined to 9.8 percent from 10.8 percent.

The Labor Department is expected to report Thursday that the unemployment rate has risen to 9.6 percent from 9.4 percent in May. And economists surveyed by Thomson Reuters project that employers will shed 363,000 jobs, up from 345,000 in May.

Amid these economic woes, consumers are saving more. Instead of splurging at the mall, households used most of their federal stimulus payments to boost savings to the highest rate in more than 15 years in May, a government report last week showed.

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AP Real Estate Writer J.W. Elphinstone in New York contributed to this report.

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2009-06-30 10:28:13