27 August 2003, 09:12  Consumer Confidence Index Rises to 81.3 From 77, Conference Board Says

Aug. 26 (Bloomberg) -- U.S. consumer confidence rose in August as Americans grew more optimistic about prospects for jobs and earnings over the next six months. The Conference Board's consumer confidence index rose to 81.3 this month, from a revised 77 in July. Last month's initially reported decline to 76.6 had been the lowest since March. A slowing pace of layoffs and the $330 billion in federal tax cuts that took effect last month helped consumers feel more comfortable about the future. Staples Inc., the world's largest office-supplies retailer, said last week that back-to-school sales have been ``very strong'' so far. ``There's been a lot of recent economic data that would indicate things are getting better,'' Staples Chief Executive Ronald Sargent said. ``The economy is starting to come out of the doldrums after a long winter.''
Economists had expected the index to rise to 80, based on the median of 65 estimates gathered by Bloomberg News. The Conference Board, based in New York, compiles its index from a survey of 5,000 households. The rise in confidence was entirely due to Americans' improving views of their prospects. The index of consumers' attitudes about conditions six months from now rose to 94.4 from 86.3 last month.
Currently `Dismal'
Over that period, 22.5 percent expect business conditions to improve, up from 20 percent last month. Importantly, 18 percent expect more jobs to be available by February, up from 16.6 percent in July. That helped contribute to a jump in expectations for future income, with 20.1 percent expecting to earn more over the next half year, up from 15.9 percent a month ago. ``Expectations are what matters, and the index is now high enough to be consistent with a robust recovery,'' said Ian Shepherdson, chief U.S. economist at High Frequency Economics Ltd. in Valhalla, New York. The index measuring sentiment about the current economy fell to 61.6 from 63. ``That's just dismal,'' said Delos Smith, a Conference Board economist. Smith blamed the drop on ongoing concern about when hiring would pick up. The number of people reporting jobs ``hard to get'' at present rose to 34.1 percent from 32.7 percent. ``You really need to see a shift in the labor market to hiring,'' Smith said. ``We haven't seen that at all.'' The Labor Department is expected to report on Sept. 6 that the economy created 10,000 jobs in August, which would break a string of six consecutive months of job losses. The economy has lost 328,000 jobs this year.
Buying Plans
Increased confidence about the future coupled with heftier paychecks from tax cuts gave a boost to Americans' buying plans this month. Of those surveyed, 4 percent expect to buy a new home, up from 3.5 percent in July. That flies in the face of data from the Mortgage Bankers Association, which reported rising interest rates led to a 15 percent drop in applications for home purchases over the past two weeks. The number of those planning to buy a major appliance rose, to 32.4 percent from 29.3 percent, the Conference Board report showed. More people say they plan to buy refrigerators, washing machines, TV sets, ranges, and clothes dryers. Americans also feel increasingly confident about taking a vacation: 43.3 percent say they plan a vacation in the next six months, up from 41.8 percent in June. Only car-buying plans fell, with 6.4 percent saying they plan to buy a new or used car, down from 8.7 percent in July. Last week General Motors Corp., the world's largest automaker, said U.S. auto sales in August are ahead of July's pace. Sales of new cars and light trucks in July reached an annualized rate of 17.3 million vehicles, the industry's best monthly showing since December, according to Autodata Corp.
Spending Up
The Conference Board's findings ran counter to the preliminary report on August consumer sentiment compiled by the University of Michigan, which reported last week that consumer confidence fell to 90.2 from 90.9. Economists surveyed by Bloomberg News expect the university to report Friday that its final reading for August, reflecting 500 households, rose to 90.4, based on the median of 37 estimates. While month-to-month changes in confidence measures have a poor track record in predicting changes in consumer spending, sustained increases tend to correlate with increased purchases, economists said.
Wal-Mart Stores Inc., the world's largest retailer, yesterday raised its August sales forecast to a gain of as much as 6 percent as back-to-school shoppers also snapped up clothing, electronics and groceries. The increase would be the biggest since June 2002 for the Bentonville, Arkansas-based chain. Increased consumer spending is forecast to help the U.S. economy accelerate to a 3.6 percent annual rate this quarter, according to the median forecast of 56 analysts surveyed by Bloomberg News. The economy grew at a 2.4 percent pace in the second quarter and at just a 1.4 percent rate in the first three months of the year. Earlier, the Commerce Department reported orders for new durable goods rose 1 percent in July. Excluding transportation equipment, orders rose 1.7 percent, the biggest gain in six months. New home sales fell 2.9 percent in July to a 1.165 million annual rate, Commerce said.//www.bloomberg.com

© 1999-2022 Forex EuroClub
All rights reserved