Confidence, Home Sales Better Than They Seem

ByJohn S. McClenahen With reports that the Conference Board's Consumer Confidence Index had fallen nearly 4 points and existing-home sales were off 0.3%, people could have been excused for thinking that June 25 was another of those down days among the roller-coaster weeks that characterize this U.S. recovery from recession. In fact, both economic reports narrowly exceeded economists' expectations, notes Maury Harris, chief U.S. economist at UBS Warburg LLC, New York. The Conference Board's measure of consumer confidence now stands at 106.4 (1985 = 100), down from the 110.3 posted in May. However, economists anticipated the index would fall to 106 in June. "This confidence measure is more influenced by job market trends and less influenced by financial market developments than are other gauges," says Harris. "Its . . . showing suggests that the job market is not weakening as much as the plunging U.S. equity market might imply." Meanwhile, sales of existing homes were at a seasonally adjusted rate of 5.75 million units in May, down from 5.77 million units in April, reports the National Association of Realtors, Washington, D.C. However, May's mark was better than the 5.70 million unit rate economists predicted. Indeed, May was the fourth highest rate on record. "The pace of home sales remains strong, and likely will remain so, given continued solid mortgage applications," says UBS' Harris. "Taken together, the reports confirm continued recovery, although one that is mild by historic standards," states Harris.