Consumer Confidence Dips; Home Sales Up By ADAM GELLER, AP Business Writer
http://story.news.yahoo.com/news?tmpl=story&cid=668&e=6&u=/ap/20050426/ap_on_bi_go_ec_fi/economy
NEW YORK - Consumer confidence declined in April for the third consecutive month, signaling Americans' concerns that economic growth is leveling off. But one area of the economy is still white hot: the government said sales of new homes shot up 12.2 percent last month to the highest level in history.
The Conference Board said Tuesday that its Consumer Confidence Index fell 5.3 points to 97.7 for April, down from a revised reading of 103.0 in March. The new reading was slightly lower than the 98.0 forecast by analysts.
The new figure takes the index to its lowest point since last November, when it registered 92.6. The confidence index peaked most recently in January when it registered 105.1.
The confidence and housing reports, while appearing to contradict each other, reflect an incremental change in consumers' mood, economists said. High fuel prices, concerns about Social Security, and a so-so job market have people more worried, but they are willing to look past those concerns because of continued low interest rates, according to analysts.
"When people are making big picture, long-term decisions, while they may not be as confident as they had been, they're not backing away from buying the house," said Joel Naroff of Naroff Economic Advisors in Holland, Pa.
Stocks closed lower following release of the reports. The Dow Jones industrial average lost 91.34 to finish at 10,151.13. The Standard & Poor's 500 index fell 10.36 to 1,151.74, and the Nasdaq composite index dropped 23.34 to 1,927.44.
The lower confidence reading points to dimmer view of both current conditions and more caution about the coming months, said Lynn Franco, director of the New York-based Conference Board's Consumer Research Center.
"Looking ahead consumers do not anticipate an improvement in economic growth nor in their incomes. And they expect an even tighter job market over the summer months," Franco said.
Economists keep a close watch on consumer confidence because consumer spending accounts for two-thirds of all U.S. economic activity.
The Conference Board's index is based on responses received thorugh April 19 to a survey mailed to 5,000 households. About 2,500 households are represented in the results.
In the other report issued Tuesday, the Commerce Department said new single-family homes were sold at a seasonally adjusted annual rate of 1.43 million units in March, confounding the consensus forecast of a small decline in sales in March, a month when mortgage rates had been inching higher.
Instead, sales climbed past the old all-time high of 1.3 million units at an annual rate set last October. Sales of both new and existing homes have set new records for four straight years, but analysts are expecting demand to cool off a bit in 2005 as mortgage rates climbed higher.
Despite the downturn in confidence, the record home sales reflects a marketplace whose dynamics are unlikely to change in the near future, said Robert I. Toll, chairman and CEO of homebuilder Toll Brothers Inc.
"There are so many consumers that if we remove 25 percent of the consumers (whose confidence has diminished), we still have a tremendous imbalance between the supply of housing and the 75 percent who are still left in the market," Toll said.
"We see from our statistics that demand continues to increase in relation to the product that we have available, so the drop in confidence is not viewed as a problem. Rather, our problem continues to be securing entitled (approved) ground for future clients," he said.
While the overall reading on confidence fell, a component index measuring consumers' view of the current economy is still at a level reflecting a fairly healthy business climate, said the Board, a private research group.
But a sub-index measuring consumers' expectations for the coming months fell to its lowest level since July 2003, pointing to growing doubts about where the economy is headed, the Board said.
The Conference Board said its expectations index declined for the fourth consecutive month, falling to 87.2 from 93.7. The number of consumers expecting business conditions to improve fell to 17.8 percent from 19.3 percent. Those expecting conditions to worse rose to 9.7 percent from 8.2 percent.
Consumers expecting more jobs in coming months declined to 14.2 percent from 15.1 percent. Those expecting fewer jobs increased to 18.0 percent from 15.8 percent.
Meanwhile, just 16.3 percent of those surveyed expect their incomes to rise in the next few months, down from 17.2 percent.
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