WASHINGTON - Confidence in the economy fell slightly in July but stayed close to a 5 ½-year high.
The Conference Board, a New York-based private research group, said Tuesday that its consumer confidence index dipped to 80.3 in July. That’s down from a reading of 82.1 in June, which was revised slightly higher and was the best reading since January 2008.
Despite the slight drop in July, confidence remains well above year-ago levels. And consumers are more optimistic about the current job market.
“Overall, indications are that the economy is strengthening and may even gain some momentum in the months ahead,” said Lynn Franco, an economist for the Conference Board.
Amna Asaf, an economist at Capital Economics, blamed the July drop in confidence on rising gasoline prices. But she said the confidence index remains at a level that is consistent with stronger growth in consumer spending in the July-September quarter.
Consumers’ confidence in the economy is watched closely, because consumer spending accounts for about 70 percent of U.S. economic activity.
“There’s clearly conflicting forces that are weighing on consumer confidence right now,” said Ryan Wang, an economist at HSBC Securities USA Inc. in New York, who forecast a decline in the measure. “The key positives have been rising home prices and gradual improvement of the labor market, but recent volatility in financial markets may have weighed on consumer expectations.”
The index surged in June, coinciding with a stronger job market. Employers added 195,000 jobs in June and many more in April and May than initially reported. That brought the monthly job growth up to an average of 202,000 in the first six months of 2013, up from 180,000 a month in the final six months of last year.
The government releases the July employment report on Friday. Economists forecast that employers added 183,000 jobs and that the unemployment rate fell to 7.5 percent from 7.6 percent in June.
A recovery in housing is also raising confidence, and a separate report Tuesday offered more encouraging news on that front.
The Standard & Poor’s/ Case-Shiller 20-city home price index jumped 12.2 percent in May compared with a year ago. That’s the biggest annual gain since March 2006. The gains were widespread, with all 20 cities reporting monthly and annual increases.
“One reason why consumers are more confident than they were a year ago continues to be the comeback in housing,” said Jennifer Lee, senior economist at BMO Capital Markets.
Svenja Gudell, senior economist at Zillow, a home price data provider, said a big reason for the recent price gains is that foreclosed homes make up a smaller proportion of overall sales. Foreclosed homes are usually sold by banks at fire-sale prices.
“Typical home values have appreciated at roughly half this pace for the past several months, which is still very robust,” Gudell said.
All 20 cities in the index showed an increase in year over-year prices, led by gains of 24.5 percent in San Francisco and 23.3 percent in Las Vegas. New York showed the smallest gain at 3.3 percent.
Property values in Dallas and Denver reached records in May, the first time any city had surpassed its pre-recession peak, the report said.
Still, the Conference Board report showed consumers are still worried that the economy remains vulnerable.
Their assessment of current economic conditions improved in July, as did their view of the job market. But their short-term outlook for the economy and job market weakened slightly in July, signaling some worries about the next few months.
The job market has shown surprising resilience in the face of federal spending cuts, economic weakness overseas and the end in January of a temporary payroll tax reduction.
Stronger hiring is not being reflected in overall economic growth at the moment. The government will release its first look at economic growth in the April-June quarter today. That report is expected to show growth slowed to an annual rate of 1 percent or less, down from a subpar 1.8 percent annual rate in the January-March quarter.
Revisions to economic growth being released today could also show stronger growth at the start of the year.
Despite recent gains, consumer confidence remains below the 90 reading that indicates a healthy economy. That level hasn’t been reached since the recession began in December 2007.
Information for this article was contributed by Martin Crutsinger and Christopher S. Rugaber of The Associated Press and Victoria Stilwell and Alexandria Baca of Bloomberg News.
Business, Pages 25 on 07/31/2013