More Mixed Signals on US Economy

By Michael Bowman

Washington
27 October 2009

The U.S. housing market is showing signs of improvement, but Americans have grown more pessimistic on the overall economy.

The consensus view among economists is that the worst recession of the post-World War II era is over, and the U.S. economy is expanding once again, albeit at a moderate pace. But expectations of an economic rebound have not dispelled gloom among American consumers, whose confidence in the nation's economy fell unexpectedly this month.

The New York-based Conference Board reports that its closely-watched Consumer Confidence Index fell to 47.7 after posting a 53.4 reading in September. The October figure was the second-lowest since May. Although both numbers are well above an all-time low reading of 25 recorded in February, they fall significantly short of 90, a mark which would signal robust consumer confidence.

Lynn Franco directs consumer research at the Conference Board.

"Consumers are growing a little more negative on what is going to happen in the economy, in the labor market, and with their earnings," said Franco.

Although U.S. stock markets have rallied over the last six months and numerous economic indicators have shown signs of stabilization, U.S. unemployment has continued to rise, and now stands at 9.8 percent. Most economists believe it will go even higher in coming months even if the U.S. economy records positive economic growth in the final months of the year. The federal government will be releasing U.S. gross domestic product data in coming days.

Consumer confidence constitutes a key indicator of economic performance, as consumer spending accounts for more than two-thirds of U.S. economic activity.

Meanwhile, a private study of U.S. real estate transactions shows housing prices rose in August for the third month in a row.

Maureen Maitland is a vice president at Standard and Poor's, which helped produce the study.

"The 10 and 20-city indexes both rose over the month [of August], so we have seen some real, steady increases in a lot of these numbers. And it has been very, very broad-based across most of the [real estate] markets," she said.

U.S. housing prices have been on a roller-coaster ride for much of the decade, spiking to record highs from 2003 to 2006 and then plunging from 2007 until a few months ago.

A rebound in the beleaguered housing market is seen as vital to an economic recovery.