NEW YORK - U.S. consumers were unexpectedly optimistic in July as consumer confidence rose for a second straight month.
The Conference Board's Consumer Confidence Index rose to 106.5, up from 105.4 in June.
Some economists were expecting the July reading to fall, but current labor market conditions helped boost confidence. However, the proportion of consumers who anticipated their incomes to increase in the months ahead remained virtually unchanged at 17.7 percent.
The strength in the survey reflected gains in both the present situation index, rising to 133 from 132.2, and the expectations index, up to 88.8 from 87.5.
UBS economist Maury Harris wrote in a research note last week, "Despite the rise for the second month in a row, the expectations component was still down from its pre-Katrina 2005 average of 94.2." The economist said the expectations component, which "correlates more closely with the rate of growth in consumer spending than the present situation or the overall indexes, has been trending lower."
Whether consumers' optimism will hold steady is unclear. Last week, the National Association of Realtors said sales of previously owned homes and condominiums fell by 1.3% in June, the third drop in a row and representing the eighth decline in 10 months. In contrast, prices also rose at the slowest pace since May 1995. The current gain is 0.9% from June 2005, which was also the smallest year-over-year price increase since May 1995.
The monthly consumer confidence survey is conducted for The Conference Board by TNS. The cutoff date for July's preliminary results was July 18. Since then, oil prices have risen, and there is debate on whether the Federal Reserve will raise interest rates again in early August.
"Consumer confidence continues to hold steady, with the prognosis little changed from last month," said Lynn Franco, director of The Conference Board's Consumer Research Center. "Present day conditions remain favorable, though not as strong as earlier this year. Expectations for the months ahead remain cautious and also below levels earlier this year."
