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Confidence index falls again
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August 25, 1998: 11:09 a.m. ET
Consumer confidence down for second month, but home sales hit new high
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NEW YORK (CNNfn) - The economic malaise plaguing overseas markets caused consumer confidence to slip for the second straight month in August, but analysts say the record jump in home sales points to a strong domestic economy for the remainder of the year.
The U.S. consumer confidence index fell to 133.1 in August from a revised 137.2 in July, the Conference Board said Tuesday.
The expectations component fell to 107.5 from a revised 113.4 reading in July. The present situation index declined to 171.5 from a revised reading of 172.9 in the prior month.
The index hasn't fallen for two consecutive months since September and October of 1996.
At the same time, the sale of existing homes soared 4 percent to a record 4.93 million units in July from 4.74 million units the month before. The current sales figure is 18 percent above July 1997 and surpasses the previous record sales level of 4.89 million units, the National Association of Realtors reports.
The bond market had little reaction to the economic data, with the 30 year Treasury bond remaining unchanged for a yield of 5.45.
"The bond market is just overwhelmed by problems abroad," said Diane Swonk, an economist for First Chicago NBD.
"We were expecting sales to remain in record territory today, not set new records," Swonk said. "This really underscores the silver lining to clouds abroad."
Uncertainty in Russia and Asia, she said, has "caused an enormous flight to quality" to U.S. currency and stocks, which has kept interest rates down and "triggered some of the strongest home buying we've ever seen."
The unexpected strength of home sales, she added, should fuel the sale of big-ticket items such as appliances and furniture for the remainder of the year.
Despite fears of the Russian economic restructuring and the Asian market uncertainty, she said, U.S. consumers find they are largely unaffected.
"When they open their pocketbooks they see their purchasing power has actually gone up a bit," she said. 
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