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U.S. brims with confidence
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May 25, 1999: 12:24 p.m. ET
May consumer confidence figure, April home sales both beat expectations
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NEW YORK (CNNfn) - Consumer confidence rose for a record seventh straight month in May and existing home sales continued at a robust pace in April, reports said Tuesday - an indication that the U.S. economy continues to sizzle.
The Conference Board reported consumer confidence rose for the seventh consecutive month, climbing to 135.8 in May. That was slightly above April's revised figure of 135.5, but far surpassed the 134.5 tally expected by analysts surveyed by Reuters.
Consumer confidence is considered crucial to the economy because consumers collectively drive two-thirds of the U.S. economy through their purchase of goods and services.
Meanwhile, April existing home sales slipped to a seasonally adjusted annual rate of 5.24 million, according to the National Association of Realtors.
That was down 3.3 percent from March's revised-higher 5.42 million rate, but still marked the third highest monthly total ever and was well above the 4.98 million figure forecast by analysts.
Increased consumer confidence during May helped crowd department stores like this one in New York
Conference Board officials attributed the gain in consumer confidence to low inflation and a strong job market, which proved more than enough to overcome the military crisis in Kosovo and rising prices at the gas pumps.
The index's seventh consecutive increase marked the longest up-trend in the survey's 32-year history. The consumer expectations index displayed continued strength as well, climbing to 109.3 in May, up from a revised 108.8 during April.
"There is certainly nothing in this report to suggest any serious slowing, or any slowing at all, in the economy is near," said Ian Shepherdson, chief U.S. economist with High Frequency Economics in New York.
Of the 5,000 U.S. households surveyed by The Conference Board, only 5.5 percent said they expect business conditions to worsen during the next six months, down from 6.2 percent during April. Roughly 15.9 percent expect there to be more jobs available, while nearly 25 percent said they expected their incomes to rise during the same period.
More than 9 percent of those surveyed said they expect to purchase a new automobile within the next six months, while those planning to buy a house slipped slightly from 4.2 percent in April to 3.9 percent during May.
Interest rates slow down home sales
Economists attribute that decrease to rising interest rates, which also led to the slight decrease in existing home sales during April.
Still, the nation remains well ahead of last year's 4.785 million units sold, and economists are predicting a continued pick-up in sales later this year as bond yields fall.
"By the end of this year, we'll have the long bond down, probably a little below 5 percent, and housing market picking back up again," predicted James Smith, chief economist with the National Association of Realtors. "I would characterize it as a very bond-friendly number" when taking into account the upward revision in March.
U.S. markets reacted well to the dual reports despite concerns they may portend some inflationary pressure. In late morning trading, both the Dow Industrial Average and the S&P 500 were up about a half-percentage point, while the Nasdaq was down slightly.
The 30-year Treasury bond was down 10/32 in late morning trading -- the same level it stood at before the reports were released -- yielding 5.778 percent.
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