NEW YORK – Consumer confidence hit a six-year high in July, a widely watched gauge of sentiment showed on Tuesday, as Americans shrugged off falling home prices to focus on a healthy jobs market, instead.
The New York-based Conference Board said that its Consumer Confidence Index, rebounded to 112.6, its highest level since August 2001 when it recorded a 114.0 reading. That compared to a revised 105.3 in June. The July 24 cutoff for the preliminary survey of 5,000 U.S. households was before last week's stock market tumble, however.
"An improvement in business conditions and the job market has lifted consumers' spirits in July," said Lynn Franco, director of The Conference Board Consumer Research Center. "Looking ahead, consumers are more upbeat about short-term economic prospects, mainly the result of a decline in the number of pessimists, not an increase in the number of optimists. This rebound in confidence suggests economic activity may gather a little momentum in the coming months."
The Present Situation index, which measures how shoppers feel now about economic conditions, increased to 139.2 from 129.9 in June. The Expectations Index, which measures shoppers' outlook for the next six months, rose to 94.8 from 88.8.
Economists closely monitor confidence since consumer spending accounts for two-thirds of all U.S. economic activity.
The report on consumer confidence was encouraging and may help alleviate investor concerns about consumer spending amid a softening housing market that shows no sign of improvement.
On Tuesday, Standard & Poor's reported that its home prices index fell for a fifth consecutive month in May, marking the gauge's steepest drop in about 16 years.
Last week, the Commerce Department said that sales of single-family homes fell 6.6 percent in June, the fifth decline in the last six months and the largest drop since January. The National Association of Realtors reported last week that sales of existing homes fell by 3.8 percent in June to the slowest level in nearly five years.
Concern about the housing market and jitters about the lending environment led to a stock market tumble late last week, though the market clawed back some territory this week amid strong earnings reports. In early trading on Tuesday, the Dow Jones industrial average rose 104.53, or 0.78 percent, to 13,462.84, after gaining more than 100 points at the market's open.
The Commerce Department allayed some inflation fears Tuesday when it reported that year-over-year core personal consumption expenditures increased 1.9 percent. That rate is within the Federal Reserve's comfort zone.