By Northern Trust

The Conference Board's Consumer Confidence Index fell to 50.4 during July from 54.3 in June.  The drop reflects declines in the Present Situation Index (26.1 vs. 26.8 in June) and the Expectations Index (66.6 vs. 72.7 in June).  Effectively, the Consumer Confidence Index has lost all the gains recorded since November 2009.

The sub-index measuring if 'jobs are plentiful" held steady at 4.3, while the gauge tracking if "jobs are hard to get" rose to 45.8 in July from 43.5 in June.  The net of these two indexes has a strong positive correlation with unemployment rate.  The net measure rose to 41.5 in July vs. 39.2 in June, implying that the unemployment rate of July is most likely to be higher than the 9.5% reading of June. 

It is widely held that consumer confidence measures and spending have a tight relationship. In recent years, this relationship has become tenuous.  The latest retail sales survey for the month of July indicates that households did not shy away from stores.  But, this evidence contradicts the suggestion from the consumer outlook survey.

April House Price Gain is Partly from Support of Government Program

The Case-Shiller Home Price Index moved up 0.5% on a seasonally adjusted basis during April, marking the tenth monthly increase in the last year.  On a year-to-year basis, the index shot up 4.6%, the largest gain since August 2006.  The latest monthly increases in home prices are partly tied to the first-time home buyer program.  The program expired as of April 30, 2010.  On a monthly basis, only two of the 20 metro areas of included in this index recorded declines in April, while on a year-to-year basis nine metro areas posted lower prices.  The elevated level of distressed properties sold recently (32% of existing homes sold in June) reduces the probability of continued gains in home prices in the near term, in addition to the adverse influence from large unsold inventories and a soft labor market. 

The opinions expressed herein are those of the author and do not necessarily represent the views of The Northern Trust Company. The Northern Trust Company does not warrant the accuracy or completeness of information contained herein, such information is subject to change and is not intended to influence your investment decisions.