Consumers show signs of faltering Confidence falls, but home sales set another record
Consumers snapped up existing homes at a record pace in July amid signs that optimism about the economy may be waning, according to two private economic reports released Tuesday.
The National Association of Realtors said sales of existing homes surged 4 percent to a record 4.93 million pace in July, continuing a remarkable boom in the housing market fueled by steadily sinking mortgage rates and plentiful jobs. The stock of unsold homes fell to a 5-month supply, a squeeze that has home builders working at a feverish pace.
However, consumer confidence may have peaked. The Conference Board said its closely watched consumer confidence index dropped to 133.1 from 137.2 in July, the first time the index had dropped two months in a row since the fall of 1996.
The level of confidence remains at high levels, but concerns about the future are beginning to show. The expectations index sank to 107.5 from 113.4 in July, mainly on worries about jobs and income. The present situation index fell modestly to 171.5 to 172.9.
The impact of the Asian economic crisis was plastered all over Tuesday's data. The weak Asian economies have helped drive U.S. interest rates ever lower, making houses and cars more affordable. On the other hand, regions that export heavily to Asia - such as the Pacific and Plains regions - suffered the biggest drops in consumer confidence.
"If you are commodity-oriented or if you have exposure to Asia, you're starting to get nervous," said Conference Board chief economist Delos Smith.
Smith said he didn't see any signs of a large, protracted drop in consumer confidence, even though fewer consumers reported plans to buy new homes, autos or appliances over the next six months.
"Since consumers have heavily fueled economic growth over the past several years, confidence readings in September and October may throw more light on the pace of activity we can expect for the final months of the year," said Lynn Franco of the Conference Board.
Written By Rex Nutting, Washington bureau chief, CBS MarketWatch