The American consumer’s mood has been tough to read since the year started, but Tuesday’s rise in The Conference Board’s Consumer Confidence Index, coupled with a surge in sales of new single-family homes, suggests that the economy is starting to shake off the effects of a lethargic first quarter.
The Consumer Confidence Index climbed to 95.4 in May from a downwardly revised 94.3 in April as Americans displayed a more positive view of the labor market. The index has been on a yo-yo since the year started — up in January, down in February, up in March, but down once again in April before the current month’s gain.
After the University of Michigan’s Consumer Sentiment Index tumbled this month, The Conference Board’s index was not widely expected to show improvement, but it did.
“When I look at the confidence numbers, I’m seeing more strength than the current consumer spending numbers show,” Jim O’Sullivan, chief U.S. economist at High Frequency Economics in Valhalla, N.Y., told Bloomberg. “When you look at the backdrop for spending — not just confidence but also income and wealth — they’re all suggesting there should be more spending.”
The Commerce Department reported Tuesday that new-home sales rose 6.8 percent in April, to a seasonally adjusted annual rate of 517,000 units, and the sales figure for March was revised upward by 3,000 to 484,000.
“Housing is coming back after a bad winter period,” Robert Brusca, president of Fact & Opinion Economics in New York, told Bloomberg. “There’s going to be an improving housing market, but a slowly improving one.”
Last week, the Commerce Department reported that housing starts climbed to an eight-year high of 1.14 million homes in April, a figure that was up 20.2 percent from March. Applications for permits, which indicate future housing starts, increased 10.1 percent to 1.14 million.
Home resales, though, fell 3.3 percent to a seasonally adjusted annual rate of 5.04 million, the National Association of Realtors said.
In a third fresh report, the Commerce Department said Tuesday that non-defense capital goods orders, excluding aircraft, a closely watched proxy for business spending plans, rose 1 percent last month after an upwardly revised 1.5 percent increase in March, Reuters reported. The so-called core capital goods orders were previously reported to have increased 0.6 percent in March.
"It provides some indication that business capital investment activity might be on the mend," Millan Mulraine, deputy chief economist at TD Securities in New York, told Reuters.
On Friday morning the Commerce Department will issue a revised reading of first-quarter gross domestic product. Economists polled by MarketWatch expect GDP to be revised to a negative 1 percent from a 0.2 percent gain.
“Everybody pretty much agrees that it will turn negative. The question is how bad was it?” Collin Martin, director of fixed income strategy for the Schwab Center for Financial Research, told MarketWatch.