Consumer confidence soars in April
NEW YORK (AP) – Consumer confidence soared past analysts’ expectations in April, helped by a brightening job picture, the Conference Board reported Tuesday. But economists said the employment growth needs to continue for Americans to remain optimistic and keep spending. In a separate report, home buyers motivated by low mortgage rates and the improved job climate propelled sales of previously owned homes in March to the second-best month on record.
The Consumer Confidence Index rose to 92.9, up from a revised 88.5 in March, the New York-based Conference Board said – better than the 88.5 that analysts had expected.
The increase of 4.4 percentage points was the largest rise from the previous month since a 10.8 percentage point increase in November 2003.
But consumer confidence has been choppy. In March, the index was unchanged from the previous month, after rising to a 97.7 reading in January.
The improvement in April was sparked by a more favorable assessment of current business and labor market conditions and increased optimism about the next six months, said Lynn Franco, director of the Conference Board’s Consumer Research Center.
“The job market, which has a major impact on confidence, appears to be gaining strength,” she said. “The percentage of consumers claiming jobs are hard to get is now at its lowest level since November 2002, and more consumers expect this trend to continue.”
However, “we need to see continued job growth in order to expect continued increases in consumer confidence,” Franco cautioned. If that doesn’t happen, consumer confidence will hover at current levels, she said in an interview.
The Present Situation index, a component of the index that seeks to measure consumers’ assessment of current conditions, rose to 90.6 from 84.4. The Expectations Index, which seeks to gauge their outlook for six months from now, increased to 94.5 from 91.3.
Economists closely follow consumer confidence because consumer spending accounts for two-thirds of all economic activity in the United States.
Tax refunds and low interest rates, which have spurred more mortgage refinancing, have given consumers the extra cash to spend in the short term, but economists worry about the second half of the year. Analysts expect the April unemployment rate, set to be released Friday, to remain unchanged at 5.7 percent.
But they are counting on nonfarm payrolls – government and private employers – to add 175,000 jobs. In March, the nation’s payrolls were up 308,000.
In addition, said Oscar Gonzalez, economist at John Hancock Financial Services, that confidence could be tempered by concerns about rising interest rates and higher gasoline prices.
Along with the consumer confidence report Tuesday came better-than-expected data on home sales.
Sales of existing homes was at a seasonally adjusted annual rate of 6.48 million last month, a 5.7 percent increase from February, according to the National Association of Realtors. March’s sales pace was second only to the all-time monthly high rate of 6.68 million recorded in September 2003.
Economists had been expecting sales to rise to a rate of about 6.20 million.
The upbeat consumer confidence report didn’t trigger any immediate selling on Wall Street, unlike other positive economic reports over the past two weeks. With the economy improving, many on Wall Street are nervous that the Federal Reserve will begin raising rates sooner rather than later.
By late afternoon, the Dow Jones industrial average was up 37.97, or 0.4 percent, at 10,482.70. Broader stock indicators were mixed. The Standard & Poor’s 500 index was up 4.30, or 0.4 percent, at 1,139.83, and the Nasdaq composite index was down 2.87, or 0.1 percent, at 2,033.90.
In its consumer confidence report, the Conference Board said consumers saying business conditions have improved rose to 21.4 percent from 20.7 percent. Those claiming conditions have worsened declined to 22.0 percent from 23.1 percent. Consumers saying jobs are “hard to get” fell to 27.6 percent from 29.9 percent. Those claiming jobs are “plentiful” increased to 15.8 percent from 14.7 percent.
Consumers’ optimism about the next six months improved for the first time this year. Those expecting business conditions to improve in that time edged up to 20.5 percent from 19.5 percent. Consumers expecting conditions to worsen dipped to 9.3 percent from 9.7 percent.
The employment outlook also was more favorable. Those anticipating more jobs to become available in the next six months increased to 18.2 percent from 15.7 percent. Those expecting fewer jobs was virtually unchanged at 17.5 percent. Consumers anticipating an increase in their incomes declined to 17.0 percent from 18.0 percent last month.
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AP-ES-04-27-04 1550EDT