Tuesday economic reports confirmed that consumers will again be spending enough to provide modest growth and freight until investment and exports strengthen later this year,
according to Jim Haughey, Newport Communications’ senior economist.
The Consumer Confidence Index reported by the Conference Board increased from 81.0 to 83.8 -- still a relatively low level this far into a business expansion -- but this sustains the 15 point postwar jump in April. That gain contributed to the reports of an April increase in both new and existing home sales back to prewar levels. New homes sold at a 1.03-million annual rate while existing home sales were at a 5.84-million rate. Both are near recent peak levels.
The confidence survey was largely done before the tax cut package was approved. Most consumers will see withholding tax cuts in their paychecks and some with get rebate checks in the mail before the next survey. So a further gain in confidence is likely.
Thirty-year fixed mortgage rates have declined by late May to 5.3% from the April average of 5.8%. That means further gains in home sales are also likely.
The confidence index has a wide spread between the assessment of current economic conditions (67.9) and the assessment of conditions six months ahead (94.4). This wide a spread usually precedes a rapid rise in confidence.