US confidence is riding high

City A.M. Reporter
US consumer confidence rose in May to its highest level in more than two years as an improving jobs outlook defied for now the growing fears about European debt market turmoil and threats to global growth.

By contrast, the US housing market, another pillar of the economy, is looking shaky after the expiration at the end of April of a home buyer’s tax credit.

Jobs were key to consumers recovering their nerve. A Conference Board report yesterday said fewer of those surveyed found jobs “hard to get”. Consumers account for more than two-thirds of US economic growth.

After more than 8m jobs were shed in a long-running economic downturn, US payrolls grew for four straight months including April.

US consumer confidence rose for the third-straight month in May, to 63.3, from a downwardly revised 57.7 in April. The median of forecasts from analysts was for a reading of 59.0 in May.

Meanwhile the Standard & Poor’s/ Case Shiller home index showed single-family home prices in 20 major cities were unchanged in March from February, but fell in the first quarter on renewed price pressure as sellers and buyers braced for a tax credit to expire on April 30.

Prices have rebounded from lows hit during the crisis, yet the end of tax incentives for home buyers, combined with mounting foreclosures, suggest more weakness, S&P said.

For the first three months of the year, S&P’s national home price index fell 3.2 per cent, unadjusted, compared with a one per cent drop in the fourth quarter.

But Californian cities, among the hardest hit by the credit crunch, posted gains.