In more destabilizing economic news on Tuesday, June 29, the Conference Board's closely watched survey showed consumer confidence plummeting in June while the Standard & Poor's Case-Shiller index showed that home prices rose in April--but probably only briefly--on the expiring tax credit.
The confidence index, which had been on the rise for three consecutive months, declined sharply in June, according to the private New York-based Conference Board. The index now stands at 52.9, down from 62.7 in May. And while home prices in April rose for the first time in seven months, according to the Standard & Poor's/Case-Shiller index of U.S. home prices, the chairman of the index committee acknowledged the rise is likely to be short-lived because the federal tax credit expired on April 30.
"Surveys like [the Conference Board index] make it hard to be a consumer bull," said Ian Shepherdson, chief U.S. economist for High Frequency Economics Ltd. in Valhalla, New York, in an analyst note. "We were puzzled by the apparent lack of response of consumers to the drop in stock prices. Well, here it is, delayed slightly."
Shepherdson said the drop in the headline index was driven mostly by the expectations component, which fell to 71.2 from 84.6. The present situation index decreased to 25.5 from 29.8.
David M. Blitzer, chairman of the Index Committee at Standard & Poor's, said in a news release that home price levels remained close to the April 2009 lows set by the S&P/Case Shiller 10- and 20-city composite series. While the April 2010 data for all 20 MSAs and the two composites do show some improvement with higher annual increases than in March's report, he said, many of the gains are "modest" and somewhat concentrated in California.
"The month-over-month figures were driven by the end of the federal first-time home buyer tax credit program on April 30," Blitzer said. "Eighteen cities saw month-to-month gains in April compared to six in the previous month. Miami and New York were the two that fared the worst in April compared to March. New York is the only MSA to have posted a new relative index low with April's report."
As fears about the U.S. economy resurfaced and new concerns about China's economy appeared, U.S. stocks were down more than 2% in the major indexes.
Read a story about consumer confidence in May from the archives of InvestmentAdvisor.com.