U.S. consumer confidence falls to four-month low

BLOOMBERG — Confidence among U.S. consumers unexpectedly fell in May to the lowest level in four months as optimism about employment prospects faded.

The Conference Board’s index decreased to 64.9 this month from a revised 68.7 in April, figures from the New York-based private research group showed today. Home prices in 20 cities dropped in the 12 months ended in March at the slowest pace in more than a year, according to another report.

The share of Americans expecting fewer job opportunities in the next six months climbed to the highest level since November, raising the risk that consumers will limit spending. A 30-cent decline in gasoline prices since early April failed to brighten spirits, showing that more progress is needed in the job market.

“Gasoline prices aren’t doing the trick,” said Aaron Smith, a senior economist at Moody’s Analytics Inc. in West Chester, Penn., whose forecast was closest. “We are making progress when it comes to the labor market, but clearly this is another sign that it’s still very slow going.”

MARKET DIRECTIONS, HOME PRICES
The Standard & Poor’s 500 Index climbed 1.1% to 1,332.42 at the close in New York. Crude oil for July delivery on the New York Mercantile Exchange settled at $90.76 a barrel, down 10 cents.

Home prices in 20 U.S. cities fell 2.6% in the 12 months ended in March, the smallest decrease since December 2010, according to an S&P/Case-Shiller index of property values.

Homebuilders are reporting their most-improved spring selling season in seven years, propelled in part by record-low mortgage rates. At the same time, the market faces challenges as mortgage credit is difficult to obtain and slow wage growth is keeping some would-be buyers on the sidelines.

“We’ve turned the corner,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Fla., who correctly projected the drop in home prices. “This was always going to be a very gradual process. No one expected a real sharp housing recovery.”

INDEX COMPARISONS
The median forecast of economists surveyed by Bloomberg News called for a confidence reading of 69.6. Estimates ranged from 62 to 74.1 in the survey of 70 economists. The measure averaged 53.7 during the 18-month recession that ended in June 2009.

The decline in the Conference Board’s measure is in line with readings from the Bloomberg Consumer Comfort Index, which dropped for four consecutive weeks after reaching a four-year high in mid-April. Both gauges are at odds with the Thomson Reuters/University of Michigan’s measure, which climbed this month to the highest level since October 2007.

“Typically, the Michigan index is more sensitive to things like stock prices and gasoline prices, whereas the consumer confidence index tends to be highly correlated with the labor market,” Moody’s Analytics’ Smith said.

The Conference Board’s measure of present conditions decreased to 45.9, the weakest reading since January, from 51.2 a month earlier. The gauge of expectations for the next six months fell to 77.6 from 80.4.

‘SOFTENING EXPECTATIONS’
“Taken together, the retreat in the present situation index and softening in consumer expectations suggest that the pace of economic growth in the months ahead may moderate,” Lynn Franco, director of economic indicators at the Conference Board, said in a statement.

The share of consumers who said jobs are currently plentiful decreased to 7.9% from 8.4%. Those who said jobs are hard to get climbed to 41% from 38.1%.

The percent of respondents expecting fewer jobs in the next six months increased to 21, a six-month high. The proportion projecting their incomes will rise over the next six months advanced to 15.2% from 13.9%. Even with the gain, income expectations are down from the end of 2011.

While plans to buy autos and appliances in the next six months increased, they’re down from late last year.