Confidence up, but outlook is another story

Associated Press

NEW YORK — Consumer confidence edged higher in May, following gains in spending and income the previous month, according to reports released Tuesday. But consumers’ outlook for the rest of the year worsened, which will likely temper the economic recovery, analysts said.

The Conference Board said Tuesday that its consumer confidence index rose to 109.8 this month from a revised 108.5 in April. While the number of consumers rating the present economy as good increased, their outlook on business conditions and jobs for the next six months soured slightly, according to the New York-based group.

"The numbers don’t point to any risk that the recovery is going to peter out. They do point to a rate of growth in the economy that has slowed," said Mark Vitner, an economist at Wachovia Securities.

Still, consumer spending remains strong. The Commerce Department reported Tuesday that Americans increased their spending by 0.5 percent in April, on top of a 0.3 percent gain the month before. Those gains came as incomes — including wages, interest and government benefits — rose 0.3 percent in April.

In a third report, sales of existing homes shot up to a seasonally adjusted annual rate of 5.79 million in April, a 7 percent increase over March’s level, according to the National Association of Realtors. April’s performance marked the third-highest monthly sales pace on record.

Although the confidence and spending figures were slightly weaker than analysts’ expectations, economists said they believe consumers will continue to spend in the months ahead — although probably at a slower pace — and help along the recovery.

"We have continuing growth and income, which supports additional spending and makes consumers feel better," said Gary Thayer, chief economist at A.G. Edwards &Sons Inc. in St. Louis. "I think that, along with very attractive mortgage rates, is helping to keep the housing market robust."

Consumers, whose spending accounts for two-thirds of all economic activity in the United States, especially splurged last month on big-ticket items, such as cars. Low interest rates and discounts on a range of costly manufactured goods continue to motivate buyers.

The consumer confidence index compares results to its base year, 1985, when it stood at 100. May’s figure of 109.8 falls slightly below the seven-month high of 110.7 reached in March after confidence tumbled following the Sept. 11 attacks.

Consumers expecting more jobs to become available in the next six months fell to 13.7 percent from 14.8 percent in April, the Conference Board said. Meanwhile, fewer consumers — 20.6 percent vs. 21.1 percent in April — expected their incomes to increase in the next six months.

The prospect of a slower recovery sent stocks lower. The Dow Jones industrial average fell 123 points to finish at 9,982 and the Nasdaq index was off 9 points to 1,652.

Federal Reserve Chairman Alan Greenspan has warned that the recovery could be less than sizzling because consumers, who kept buying throughout the slump, might not have a lot of pent-up demand coming out of it.

Citing uncertainties about the vitality of the recovery, the Fed earlier this month decided to leave short-term interest rates unchanged at 40-year lows. Economists predict policy-makers will continue to hold rates steady through the summer.

That should motivate consumers to continue buying and businesses to step up investment, which would help the economic recovery.

Many economists believe the economy, which grew at a brisk 5.6 percent pace in the first quarter, slowed to a rate of about 3 percent to 3.5 percent in the current quarter, a still respectable pace. Part of that expected slowdown may come from less enthusiastic shoppers, analysts say.

Copyright ©2002 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Talk to us

> Give us your news tips.

> Send us a letter to the editor.

> More Herald contact information.

More in Business

A closing sign hangs above the entrance of the Big Lots at Evergreen and Madison on Monday, July 22, 2024, in Everett, Washington. (Ryan Berry / The Herald)
Big Lots announces it will shutter Everett and Lynnwood stores

The Marysville store will remain open for now. The retailer reported declining sales in the first quarter of the year.

George Montemor poses for a photo in front of his office in Lynnwood, Washington on Tuesday, July 30, 2024.  (Annie Barker / The Herald)
Despite high mortgage rates, Snohomish County home market still competitive

Snohomish County homes priced from $550K to $850K are pulling in multiple offers and selling quickly.

Henry M. Jackson High School’s robotic team, Jack in the Bot, shake hands at the 2024 Indiana Robotics Invitational.(Henry M. Jackson High School)
Mill Creek robotics team — Jack in the Bot — wins big

Henry M. Jackson High School students took first place at the Indiana Robotic Invitational for the second year in a row.

The computer science and robotics and artificial intelligence department faculty includes (left to right) faculty department head Allison Obourn; Dean Carey Schroyer; Ishaani Priyadarshini; ROBAI department head Sirine Maalej and Charlene Lugli. PHOTO: Arutyun Sargsyan / Edmonds College.
Edmonds College to offer 2 new four-year degree programs

The college is accepting applications for bachelor programs in computer science as well as robotics and artificial intelligence.

FILE — Boeing 737 MAX8 airplanes on the assembly line at the Boeing plant in Renton, Wash., on March 27, 2019. Boeing said on Wednesday, Feb. 21, 2024, that it was shaking up the leadership in its commercial airplanes unit after a harrowing incident last month during which a piece fell off a 737 Max 9 jet in flight. (Ruth Fremson/The New York Times)
Federal judge rejects Boeing’s guilty plea related to 737 Max crashes

The plea agreement included a fine of up to $487 million and three years of probation.

Neetha Hsu practices a command with Marley, left, and Andie Holsten practices with Oshie, right, during a puppy training class at The Everett Zoom Room in Everett, Washington on Wednesday, July 3, 2024. (Annie Barker / The Herald)
Tricks of the trade: New Everett dog training gym is a people-pleaser

Everett Zoom Room offers training for puppies, dogs and their owners: “We don’t train dogs, we train the people who love them.”

Andy Bronson/ The Herald 

Everett mayor Ray Stephenson looks over the city on Tuesday, Jan. 5, 2015 in Everett, Wa. Stephanson sees  Utah’s “housing first” model – dealing with homelessness first before tackling related issues – is one Everett and Snohomish County should adopt.

Local:issuesStephanson

Shot on: 1/5/16
Economic Alliance taps former Everett mayor as CEO

Ray Stephanson will serve as the interim leader of the Snohomish County group.

Molbak's Garden + Home in Woodinville, Washington will close on Jan. 28. (Photo courtesy of Molbak's)
After tumultuous year, Molbak’s is being demolished in Woodinville

The beloved garden store closed in January. And a fundraising initiative to revitalize the space fell short.

Everett Mayor Cassie Franklin, Advanced Manufacturing Skills Center executive director Larry Cluphf, Boeing Director of manufacturing and safety Cameron Myers, Edmonds College President Amit Singh, U.S. Rep. Rick Larsen, and Snohomish County Executive Dave Somers participate in a ribbon-cutting ceremony on Tuesday, July 2 celebrating the opening of a new fuselage training lab at Paine Field. Credit: Arutyun Sargsyan / Edmonds College
‘Magic happens’: Paine Field aerospace center dedicates new hands-on lab

Last month, Edmonds College officials cut the ribbon on a new training lab — a section of a 12-ton Boeing 767 tanker.

Gov. Jay Inslee presents CEO Fredrik Hellstrom with the Swedish flag during a grand opening ceremony for Sweden-based Echandia on Tuesday, July 30, 2024, in Marysville, Washington. (Ryan Berry / The Herald)
Swedish battery maker opens first U.S. facility in Marysville

Echandia’s marine battery systems power everything from tug boats to passenger and car ferries.

Helion Energy CEO and co-founder David Kirtley talks to Governor Jay Inslee about Trenta, Helion’s 6th fusion prototype, during a tour of their facility on Tuesday, July 9, 2024 in Everett, Washington. (Olivia Vanni / The Herald)
State grants Everett-based Helion a fusion energy license

The permit allows Helion to use radioactive materials to operate the company’s fusion generator.

People walk past the new J.sweets storefront in Alderwood Mall on Thursday, July 25, 2024, in Lynnwood, Washington. (Olivia Vanni / The Herald)
New Japanese-style sweets shop to open in Lynnwood

J. Sweets, offering traditional Japanese and western style treats opens, could open by early August at the Alderwood mall.

Support local journalism

If you value local news, make a gift now to support the trusted journalism you get in The Daily Herald. Donations processed in this system are not tax deductible.