New York – A steady job market helped consumers overcome their concerns over high energy costs in July, unexpectedly lifting a barometer of consumer sentiment Tuesday.
But there are warning signs that the optimism may be short-lived as shoppers face a barrage of concerns including a cooling housing market, rising interest rates and war in the Middle East.
A report that showed another monthly decline in home sales, which have been a source of confidence for consumers, also stoked concerns about the economy. The decline, however, was less than analysts expected.
The National Association of Realtors reported Tuesday that sales of previously owned homes and condominiums dropped 1.3 percent in June to a seasonally adjusted annual rate of 6.62 million units; analysts had expected sales to fall to 6.60 million units. It was the eighth time in the past 10 months that sales slipped, while home prices edged up at the slowest pace in more than a decade.
The New York-based Conference Board said Tuesday its confidence index rose to a better-than-expected reading of 106.5 from a revised 105.4 in June. Analysts had expected the index to fall slightly to 104.
“The employment situation is helping confidence hold at a decent level,” said Gary Thayer, chief economist at A.G. Edwards & Sons Inc. “Right now, consumers are happy that they have a job, and that at least most of the economy outside of housing is doing well.”
But he cautioned that overall, “there are some cracks in the foundation” and said a drastic downturn in the housing market or job market would be a problem for consumer spending.
Consumer confidence has been volatile this year, with the index posting declines in February and May amid pessimism about the job market. This year’s overall performance is in line with the rebound seen since November in the aftermath of last year’s Gulf of Mexico hurricanes, however.
