Confidence among U.S. consumers declined in July from a five-year high as higher borrowing costs and gasoline prices tempered Americans’ outlook for the economy, even as their assessment of current conditions improved.
The Conference Board’s index decreased to 80.3, the second-highest level since January 2008, from a revised 82.1 the prior month, the New York-based private research group said today. The median forecast in a Bloomberg survey of economists called for a reading of 81.3. Another report showed home prices rose in May by the most in more than seven years.
While consumers’ outlook dimmed, a measure of their views of current conditions rose to a five-year high as employers stepped up hiring, and more Americans said they planned to buy homes, cars and appliances.
“If you ask someone how things are right now, they’re all saying it’s better to an extent they haven’t in quite some time,” said Neil Dutta, head of U.S. economics at Renaissance Macro Research LLC in New York, whose forecast of 80.5 was closest in the Bloomberg survey. “The labor situation is improving and consumers have more intentions to buy major things like homes and autos. To me, that’s good news.”
Stocks climbed as companies from Eastman Chemical Co. to Herbalife Ltd. Raised their forecasts for full-year profit and investors awaited results from the Federal Reserve’s two-day meeting that ends tomorrow. The Standard & Poor’s 500 Index advanced 0.2 percent to 1,688.49 at 1:02 p.m. in New York.
The housing market gained momentum in May, another report showed today. The S&P/Case-Shiller index of property values in 20 cities climbed 12.2 percent from May 2012, the biggest 12-month gain since March 2006, after advancing 12.1 percent a month earlier, a report showed today in New York. The median projection in a Bloomberg survey called for a 12.4 percent increase.
Historically low borrowing costs and an improving job market are boosting demand for residential property and driving prices up. The rise in home values is also bolstering household finances, which may spur consumer spending, the largest part of the U.S. economy.
“We continue to look forward to upward momentum” in the housing market, said Anika Khan, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina, a subsidiary of the largest U.S. mortgage lender.
Improving consumer confidence is “a big factor in bringing buyers back into the housing market,” Daniel Fulton, chief executive officer of Weyerhaeuser Co., said in a July 26 conference call.
The U.S. real-estate investment trust that manages 20.6 million acres of timberlands in North America is poised to increase revenue by 16 percent this year, analysts estimate. The lumber supplier expects both pricing and domestic log activity to pick up.
While housing will help the economy advance in the second half of this year, some global markets continue to struggle. Most Chinese provinces reported first-half growth below annual targets that in some instances were already lower than last year’s goals, underscoring the breadth of the nation’s slowdown.
Seventeen of 30 provinces and provincial-level cities said January-to-June expansion trailed 2013 targets, compared with 14 of 31 in last year’s first half, according to data compiled by Bloomberg.
Estimates for U.S. consumer confidence ranged from 77 to 85.5 in the Bloomberg survey of 75 economists. The measure averaged 53.7 during the recession that ended in June 2009.
The figures follow the Thomson Reuters/University of Michigan final index of consumer sentiment, which rose to the highest level in six years as Americans’ views of their finances improved. Bloomberg’s Consumer Comfort Index matched its highest level in more than five years during the week ended July 21.
The Conference Board’s measure of expectations for the next six months decreased to 84.7 from 91.1. The gauge of present conditions improved to 73.6 this month, the highest since May 2008, from 68.7 in June.
More Americans said jobs are currently plentiful -- 12.2 percent in July, the most since September 2008, compared with 11.3 percent a month earlier.
Buying plans also improved, helped in part by the pickup in housing. The share of people who expect to purchase a major appliance rose to 50, the highest on record. The most Americans in nine months said they planned to buy an automobile, while home-buying plans were the strongest since November.
An improved labor market has helped boost confidence levels that plunged during the biggest recession since the end of World War II. Employment climbed by 202,000 a month on average in the first six months of this year, up from 180,000 in the second half of 2012, Labor Department data show.
Fed officials, who meet today and tomorrow, forecast in June that the jobless rate will fall to 6.5 percent to 6.8 percent in the fourth quarter of 2014. Unemployment in June was 7.6 percent.
Job gains, along with cheaper borrowing costs, are emboldening consumers to consider large purchases such as vehicles and homes. New cars and trucks sold in June at the fastest pace since 2007, according to Ward’s Automotive Group.
A rebound in housing helped move trucks off dealer lots as sales of new homes rose last month to the highest level in five years, indicating stronger residential construction is spreading throughout the economy.