Barbara Hagenbaugh
USA Today
WASHINGTON — Consumer confidence jumped to the highest level in five months in April as Americans’ expectations about the economy’s future, including the job market, improved, according to a report out Tuesday that offered fresh hope that the economy may be hitting a bottom.
Still, confidence remains very low, suggesting there is a long way to go before the economy gets back onto a healthy track.
The closely watched consumer confidence index rose to 39.2 in April from 26.9 in March, the Conference Board said. That marked the second consecutive increase in confidence from the record low hit in February and brought the index to the highest level since November.
While consumers’ feelings about the current economy improved a bit, their view of the economy six months out posted a big jump. The so-called expectations index was 49.5 this month, up from 30.2 in March and the highest since September.
“The sharp increase in the expectations index suggests that consumers believe the economy is nearing a bottom,” says Lynn Franco, director of The Conference Board Consumer Research Center. “However, this Index still remains well below levels associated with strong economic growth.”
Says Steven Wood, chief economist at Insight Economics, “Confidence is deeply mired in recessionary territory although consumers are not as depressed as they were earlier in the year.”
The consumer confidence index was 90.6 in December 2007, the month the economy fell into recession.
Consumers’ view of the job market six months from now improved. Some 13.9% said they expected there would be more jobs in six months than there are now, up from 7.3% in March and the highest in nearly two years. Still, one-third said they expected there would be fewer jobs in six months while more than half said they expected there would be the same number of jobs.
Economists keep a close eye on consumer confidence because consumer spending accounts for more than two-thirds of U.S. economic activity.
Economists in a USA TODAY survey conducted April 16-22 estimated consumer spending rose at a seasonally adjusted annual rate of 0.9% in the January-March quarter after diving in the second half of 2008. Official government numbers on first quarter consumer spending and overall economic activity will be released Wednesday. The economists predicted gross domestic product, the broadest gauge of U.S. economic activity, contracted at a 5% annual pace in the first quarter after plunging 6.3% in the fourth quarter, according to the median answer of the 51 economists.
More consumers said they planned to buy cars, homes and appliances in the next six months in April than in March, the Conference Board said.
Earlier Tuesday, a housing index showed that home prices dropped sharply in February, but for the first time in 25 months the decline was not a record — another sign the housing crisis could be bottoming.
The Standard & Poor’s/Case-Shiller index of home prices in 20 major cities was down 18.6% from February 2008, slightly better than the 19% in January.
The 10-city index was down 18.8%, compared to 19.4% the month before, the first time in 16 months it did not set a record.
But the good news was mixed. All 20 cities in the report showed monthly and annual price declines, and half recorded annual records. Prices were down more than 10% compared with February 2008 in 15 cities.
Prices in the 20-city index are down 30.7% from their peak in the summer of 2006, and the 10-city index is off more than 31.6%.
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WHY HOME PRICE INDEXES VARY |
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Among the differences in the home price indexes: · The Standard & Poor’s/Case-Shiller nationwide housing index focuses on major metropolitan areas and includes expensive properties as well as cheaper ones. The S&P/Case-Shiller indexes use only purchase prices gathering information from county assessor and recorder offices. · The Federal Housing Finance Agency Home Price Index, more national in its scope, excludes higher-priced homes and ones financed by riskier mortgages, and it includes refinance appraisals. The FHFA index is calculated solely using home loans of $417,000 or less that are bought or backed by government-sponsored mortgage companies Fannie Mae and Freddie Mac. That excludes properties bought with some of the riskier varieties of home loans that have gone sour. · The National Association of Realtors uses a median price of a home sold. Many economists consider the FHFA and Case-Shiller indexes to be better measurements of the housing market than the Realtors’ report, because both indexes examine price changes for the same properties over time instead of calculating a median price for houses sold during a particular month or quarter. Source: AP, FHFA |
Contributing: Associated Press