US consumer confidence rebounds, house prices increase

Consumer confidence rebounded in May, but households were a bit pessimistic about their short-term income prospects even as they expected strong job growth to persist, which could restrain consumer spending. The Conference Board said on Tuesday its consumer confidence index rose 2.4 points to a reading of 128.0 this month from a downwardly revised 125.6 in April. The index was previously reported at 128.7 in April.
"If consumers don't step up their spending ... then the growth outlook this year may disappoint on the weak side," said Chris Rupkey chief economist at MUFG in New York. The Conference Board's so-called labour market differential, derived from data on respondents' views on whether jobs are plentiful or hard to get, increased to 26.6 in May, the best reading since May 2001, from 22.7 in April.
That measure, which closely correlates to the unemployment rate in the Labour Department's employment report, suggests that labour market slack continues to shrink. But consumers were less upbeat about their short-term income prospects. The share of consumers expecting an improvement in their income fell to 21.3 percent this month from 21.8 percent in April. The proportion expecting a decrease rose to 8.2 percent in May from 7.9 percent in the prior month.
The weak income readings are despite massive tax cuts which the Trump administration claimed would boost paychecks for American workers. The $1.5 trillion tax cut package came into effect in January. Consumers also showed a reluctance to commit to purchases of big-ticket items this month, with intentions to buy automobiles, houses and appliances declining. Consumer spending braked sharply in the first quarter and there are signs that it picked up early in the April-June period.
A separate report on Tuesday showed the S&P CoreLogic Case-Shiller composite index of home prices in 20 metropolitan areas increased 0.5 percent in March after rising 0.8 percent in February. House prices gained 6.8 percent in the 12 months to March after rising by the same margin in February.
The solid gains are at odds with recent data which had suggested a cooling in house prices. The Federal Housing Finance Agency reported last week that house prices edged up 0.1 percent in March from February. The regulator's index is calculated by using purchase prices of houses financed with mortgages sold to or guaranteed by mortgage finance companies Fannie Mae or Freddie Mac.