Positive Signs for US Economy as Confidence Rises

27 June 2001

The US economy may be stabilising according to a number of newly released reports.

Consumer confidence, as measured by New York research group The Conference Board’s monthly index, rose in June to its highest level since December, up from 116.1 in May to 117.9.

The Commerce Department also released a couple of positive reports. One showed a 0.8% growth in home sales in May – the third rise in four months – suggesting consumer resilience to the slowdown. In good news for manufacturers, the Department also reported a 2.9% jump in durable-goods orders in May, following April’s 5.5% slump.

But there are fears that the news may dampen enthusiasm at the Federal Reserve for pursuing aggressive cuts in interest rates. Since January, there have been five 0.5% cuts, but some analysts are now expecting only a 0.25% reduction when officials meet later this week.

However, some anxiety remains about the economy. Although the rise in confidence measured by The Conference Board reflected increasingly positive assessments by consumers of the state of the economy six months ahead, their appraisal of the current situation actually dropped in June. Moreover, an index measuring consumers’ intentions to buy cars dropped to its lowest point since December 1997.

Similarly, although sales of new homes and existing homes, driven by low mortgage rates, are up year-on-year 8.8% and 3.5% respectively, the housing market may yet be affected by weak increases in jobs and incomes.

News source: Wall Street Journal