CBSN

Consumer Confidence Rebounds

consumer spending, shopping, economy
AP
Consumer confidence rebounded in July from a sharp drop last month, suggesting consumers believe that the U.S. economy is headed in the right direction.

The Conference Board said Tuesday that its Consumer Confidence Index increased to 141.7 in July, up from 139.2 last month but well below the record of 144.7 set in January and repeated in May. Most analysts were expecting a smaller increase.

The survey showed consumers are more optimistic about the economic outlook for the next six months than they were a month ago, 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," Franco said.

"It means the consumer is still confident but not so much that this would indicate a revival of inflation," said Marshall Loeb, columnist for CBS Martketwatch.com. "That (consumer confidence upswing) indicates that we're in a situation of moderate growth in the economy and that's a fairly good situation to be in."

The 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.

Wall Street was mixed shortly after the release of the numbers, with the Dow Jones industrial average up 17 points to 10,701 and the Nasdaq composite index down nearly 20 points to 3,961.

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.

Mark Vitner, an economist with First Union Corp. in Charlotte, N.C., said the confidence rating should translate into strong consumer spending in the second half of this year, which could mean healthy back-to-school sales and holiday shopping.

But he said the numbers probably won't carry much weight when the Federal Reserve meets next month to consider if it will hike interest rates again.

"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," he 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."

The central bank has hiked interest rates six times since last summer in an attempt to slow overall growth and keep inflation under control.

According to Tuesday's report, 44.9 percent of consumers labeled business conditions as "good," compared with 43.7 percent last month. The percentage of consumers rating conditions as "bad" dropped to 7.4 percent from 9.4 percent in June. Consumers claiming jobs were "hard to get" fell to 9.9 percent from 11.2 percent.

In the consumer confidence survey, the index measuring feelings about present overall conditions jumped from 180.1 to 185.9, while the index measuring expectations for the next six months improved modestly, from 111.9 to 112.2.

But the business-funded Conference Board survey showed some consumer doubts.

The percentage of respondents expecting business conditions to improve over the next six months dropped slightly. Attitudes toward jobs were also somewhat mixed, and 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.

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