NEW YORK/WASHINGTON (Reuters) – Home prices rose for the fourth month in a row in May, suggesting the recovery in the housing market continued to gain traction.
In other data on Tuesday, consumer confidence unexpectedly rose in July but spending fell in June for the first time in nearly a year when accounting for inflation.
The S&P/Case Shiller composite index of 20 metropolitan areas gained 0.9 percent in May on a seasonally adjusted basis, topping economists’ expectations for a 0.5 percent gain.
The housing market, which collapsed during the 2007-2009 recession, has been a relative bright spot in the economy this year, although it remains hobbled by a glut of unsold homes.
“Real estate continues to show improvement off the bottom. That’s one of the few encouraging signs we’ve seen,” said Subodh Kumar, an investment strategist at Subodh Kumar & Associates in Toronto.
On a non-seasonally adjusted basis, prices fared even better, jumping 2.2 percent. However, prices were down 0.7 percent from a year ago.
But housing makes up a smaller share of the economy than before the recession and can provide only a limited lift to the broader recovery, which has looked wobbly of late.
Consumer spending, which makes up about 70 percent of economic activity, fell 0.1 percent in June after adjustment for rising prices, the Commerce Department said in a separate report.
“Consumers are afraid,” said Matthew Lifson, an analyst at Cambridge Mercantile Group in Princeton, New Jersey. “This data suggests that the U.S. economy is stagnant overall and it’s just muddling.”
Before adjustment for inflation, spending was flat. That was just below the median forecast in a Reuters poll of 0.1 percent increase.
Reaction to the data was muted in financial markets and U.S. stocks were slightly higher in early morning trading.
Pressure is rising on policymakers at the Federal Reserve to do more to help the sputtering economy. The faltering recovery also weighs on President Barack Obama’s hopes of reelection in November.
Policymakers at the Fed will start a two-day meeting on Tuesday, and Fed Chairman Ben Bernanke has said they would be looking for signs of any stall in the recovery of the labor market.
No major policy announcement is expected on Wednesday although some economists think the Fed this week could push further into the future its conditional pledge to keep rates near zero through late 2014.
A report on Friday is expected to show the jobless rate holding at 8.2 percent in July. It has been above 8 percent since February 2009 – nearly all of Obama’s time in office so far.
The Commerce Department had already reported that economic growth slowed over the entire second quarter as consumers spent at their slowest pace in a year. But Tuesday’s data showed consumer spending lost momentum throughout the period when taking inflation into account.
Still, consumers’ moods have not completely deteriorated and a separate gauge showed confidence unexpectedly rose in July as Americans were more optimistic about the short-term outlook than they were about their current situations.
The Conference Board said its index of consumer attitudes climbed to 65.9 from a upwardly revised 62.7 in June, topping economists’ expectations for a decline to 61.5.
Despite the improvement, confidence remains well below levels before the financial crisis.
“Given the current economic environment – in particular the weak labor market – consumer confidence is not likely to gain any significant momentum in the coming months,” Lynn Franco, director of The Conference Board Consumer Research Center, said in a statement.
Upscale leather goods maker Coach Inc reported another quarter of slowing growth in North America, its top market, hurt by the deals it needed to offer price-conscious shoppers to get them into its outlet stores.
In the manufacturing sector, the pace of business activity in the Midwest rose in July, as somewhat stronger new orders offset a weakening labor environment.
The Institute for Supply Management-Chicago business barometer rose to 53.7 from 52.9 in June. The report comes a day ahead of the larger national manufacturing report.
Household income rose in June by 0.5 percent – the most in three months – although consumers socked extra cash by saving more.
With price-adjusted incomes rising in June and consumption falling, the saving rate for households rose to 4.4 percent, its highest level in a year.