US consumer confidence fell unexpectedly in May at the start of a big week of economic data that will show how the world’s largest economy is weathering renewed turmoil in Europe.
The Conference Board, an industry group, said its index of consumer attitudes fell to 64.9 from a downwardly revised 68.7 the month before. Analysts had expected to see a gain of 69.7. April’s figure was originally reported as 69.2.
It was the weakest confidence report in four months, suggesting that a fall in the stock market triggered by Europe’s woes has hurt sentiment and may point to slow consumption growth in the second quarter.
“Consumers were less positive about current business and labour market conditions, and they were more pessimistic about the short-term outlook,” said Lynn Franco, director of the Conference Board Consumer Research Center.
Respondents who said that jobs were “hard to get” rose to 41 per cent, up from 38.1 per cent the month before. The “jobs are plentiful” component declined to 7.9 per cent from 8.4 per cent. Those expecting more jobs in the months ahead decreased to 15.8 per cent from 16.9 per cent.
But the confidence number is merely a warm-up for a week that includes updated first-quarter growth data on Thursday before non-farm payrolls and the purchasing managers' index for manufacturing on Friday.
The last two are the most closely watched measures of short-term economic health. They will show whether an apparent slowdown in jobs growth was simply because of unseasonal weather and whether Europe’s weakness is hitting output in the US.
Elsewhere on Tuesday the data boosted one of the most encouraging trends on the US economy – a gradually bottoming out in the housing sector. House prices posted a monthly rise on the back of increased sales
The S&P/Case-Shiller home price index, which tracks monthly changes in the value of residential property in 20 metropolitan regions across the US, showed prices edged 0.1 per cent higher on a seasonally adjusted basis in March from the previous month.
Although the data fell below consensus estimates of a 0.3 per cent rise, the latest month’s numbers continued the month-on-month gain seen in February, which was the first rise in 10 months.
Year on year, property values declined in March at their slowest pace since December 2010. Not adjusted for seasonal variations, prices fell 2.6 per cent compared with a year earlier after a 3.5 per cent drop in February.
Data last week showed that US new home sales rose in April at a better rate than expected while sales of previously owned homes increased 3.4 per cent to an annual rate of 4.62m units last month, the highest level since May 2010.
“While a broad regional variation remains, the fact that some of the areas hardest hit during the housing downturn such as Florida, Arizona and California have seen gains in recent months is a positive sign that the gradual improvement in housing conditions is becoming somewhat broader based,” said Peter Newland, analyst at Barclays.
On a regional basis, 15 of the 20 regions surveyed experienced gains, up from 13 in February, led by Phoenix, Seattle and Miami. Detroit posted the largest decline.
Ed Stansfield, chief property economist at Capital Economics, said: “In seasonally-adjusted terms, the Case-Shiller national house price index reported its strongest quarterly gain for 2 1/2 years. And with the economic recovery now on firmer ground, we see no reason to alter our view that US house prices have now found a floor.”
But many analysts are still wary of saying a housing market comeback might be under way, with average house prices still more than 30 per cent lower than their 2006 peak. While there has been some loosening of credit conditions, with interest rates at historical lows, many Americans still face difficulty in obtaining financing for home purchases.
In spite of some positive sentiment about the jobs market at the start of the year, Americans have since become more pessimistic about employment and salary prospects, which analysts say could hamper any real recovery as potential buyers stay away.
“While there has been improvement in some regions, housing prices have not turned,” says David Blitzer, chairman of the index committee at S&P Indices. “This month’s report saw ... five cities hit new lows. However, with last month’s report nine cities hit new lows. Further, about half as many cities, seven, experienced falling prices this month compared to 16 last time.”