Consumer Confidence Matches Economic Data

By John S. McClenahen The Conference Board's consumer confidence index rose more than economists generally expected this month, reflecting the strength of recent economic data showing an accelerating U.S. recovery from recession. This month the consumer confidence index increased to 81.3 (1985=100), up from a revised 77.0 in July. In July consumer confidence was lower than in June, so August's figure marks a turnaround in the closely watched index. "The welcome bounce back in confidence this month was entirely due to consumers' increasing optimism about the future," says Lynn Franco, director of the Consumer Research Center at the Conference Board, a New York business research group. "Growing optimism about the economy over the next six months echoes the latest gain in the Conference Board's Leading Economic Index. However, continued optimism will depend on positive developments in the labor market." Meanwhile, the Commerce Department reported on Aug. 26 that orders for durable goods -- those expected to last three years or more -- increased 1% in July to $174 billion. It was the third consecutive monthly increase and in sharp contrast to economists' expectations for a 2% decline. Computers and electronic products, up 1.9%, paced July's new orders for manufactured durables. "The 1% improvement in new orders for durable goods in July followed a 2.6% gain in June and sets the stage for rising production activity in the third quarter of this year," says Daniel J. Meckstroth, chief economist at Manufacturers Alliance/MAPI, an Arlington, Va.-based business research and public policy group. "Although imports have siphoned off much of the growth in consumer spending recently, the rebound reported in business spending for industrial and IT equipment is a very positive sign for American manufacturers." And housing remains remarkably strong. Sales of new single-family homes were at a seasonally adjusted annual rate of 1.165 million in July, down from a record high of 1.2 million in June but 21.2% above their July 2002 mark of 961,000, the Commerce Department and the U.S. Department of Housing and Urban Development jointly reported.

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