Consumer Confidence Dips Again, but Forecast Still Bullish
NEW YORK — Consumer confidence weakened in April for the third consecutive month, suggesting that there could be some slowing in the robust spending that has fueled U.S. economic growth.
But Americans’ expectations about future business and job opportunities remain strong, and economists said they expect this will prompt inflation fighters at the Federal Reserve to raise interest rates for a sixth time when they meet in May.
The Conference Board reported Tuesday that its consumer confidence index dipped to 136.9 in April from a revised 137.1 the month before. That was down sharply from the record 144.7 in January and the lowest since October.
Still, the reading was stronger than analysts had expected, given the instability in stock markets.
In a separate sign of economic strength, the National Assn. of Realtors reported sales of existing homes rose by 1.5% in March, the second straight monthly gain despite rising interest rates on mortgage loans.
The consumer confidence figures, based on a survey of 5,000 U.S. households by the New York-based group, are closely watched because they provide clues on consumer spending, which constitutes about two-thirds of the U.S. economy. The index compares results to its base year, 1985, when it stood at 100.
The strength of the economy has prompted the Federal Reserve to raise interest rates five times since June for fear too-rapid economic growth could spur inflation.
Economists said both reports support expectations that Fed policymakers will raise rates yet again when they meet May 16. But the slight cooling of confidence has reduced fears that the Fed would be even more aggressive by raising rates one-half point, compared with past increases of one-quarter point.
“Recent rhetoric seems to indicate they’re still inclined to raise rates,†said Gary R. Thayer, chief economist at A.G. Edwards & Sons Inc. in St. Louis. “I think we need more evidence of economic slowing before they [the Fed] hold back.â€
Most economists expect some weakening in consumer spending in the April-June quarter, because of rising interest rates.
But they point out that there is evidence that any falloff won’t be precipitous.
The index dipped for an extended period last year from July through October, but that didn’t produce a dip in spending. The weak sequence was followed by one of the best holiday shopping seasons in years.
Meanwhile, the board’s index measuring consumer expectations for the next six months rose to 108.2 in April from 106.8 in March.
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