- The Washington Times - Tuesday, May 27, 2003

NEW YORK (AP) — Consumers remain wary about current economic conditions but are confident that a turnaround is months away, pushing a key indicator to a six-month high, according to the latest consumer-confidence survey, released yesterday.

The Conference Board index tracking consumer confidence in the economy rose in May from 81 in April to 83.8, the highest level since November’s reading of 84.9. Analysts were expecting a reading of 84 for May. The April index had soared 19.6 points from March as consumers cheered a quick end to the war in Iraq.

“The postwar euphoria experienced last month has quickly given way, and consumers’ focus has returned to matters on the home front,” said Lynn Franco, director of the Conference Board’s Consumer Research Center.

Consumers remain clearly upbeat in at least one area: the housing market. Enticed by record-low mortgage rates, consumers snapped up houses in April, pushing sales of new homes to their highest level this year.

The Commerce Department reported yesterday that sales of new single-family homes rose by 1.7 percent from March to April to a seasonally adjusted annual rate of 1.03 million, the best since December.

Sales of previously owned homes also remained strong. The National Association of Realtors said such sales increased by 5.6 percent in April to a rate of 5.84 million — the fifth-highest level on record.

Those figures were helped by falling mortgage rates. In April, the average 30-year fixed rate was 5.81 percent, compared with 6.99 percent for the same month a year ago. And rates have continued their downward trend in May.

The consumer-confidence and home-sales reports gave Wall Street reason to cheer, moving the markets into positive territory.

The Conference Board’s report found that consumers’ faith in the economy right now is deteriorating. The Present Situation Index, a component of the confidence index and a measure of current sentiment, fell to 67.9 this month from 75.2 in April, as people struggle to find work in the challenging job market.

Consumers who said jobs are difficult to find jumped to 32.6 from 29.4, while those saying work is plentiful slipped to 12.6 from 13 in April.

“The share of people reporting that jobs are hard to get rose to the highest level in nine years,” said Douglas Porter, senior economist with BMO Nesbitt Burns Securities. “But consumers still remain relatively confident that the economy is poised to turn around.”

That was evident in the Conference Board’s Expectations Index, the other confidence-index component and a gauge of consumer sentiment about the next six months. It rose to 94.4 in May from 84.9 in April.

Consumers were more upbeat about the job market in particular. Those expecting more jobs in the next six months jumped to 17.8 in May from 16.4 in April, while respondents expecting fewer jobs fell to 17.6 from 20.9.

“Consumers are becoming increasingly optimistic about the outlook, despite recognizing that current conditions are still quite poor,” said Scott Hoyt, economist and director of consumer economics at Economy.com.

Mr. Hoyt said consumers are reading the signs of an improving postwar economy: the upward movement of the stock market, falling energy prices and the passage of tax cuts.

“Generally, the story that economists have been telling for some time — that once the war is over, the economy should gradually improve,” he said. “Consumers are seeing some of the precursors of that.”

The Conference Board’s indexes are derived from responses received through May 20 to a survey mailed to 5,000 households in a consumer-research panel. The results are from a partial sample of at least 2,500 respondents.

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