Concerns Don’t Hit U.S. Sales of Homes

U.S. consumer confidence rose tepidly in May as Americans fretted about record gasoline prices and violence in Iraq, but that hasn’t stopped shoppers from snapping up homes and buying summer clothes.

The Conference Board, a private business research group, said Tuesday that its monthly gauge of consumer confidence edged up to 93.2 from 93.0 in April.

That was below forecasts for an increase to 93.5, and analysts said developments in Iraq and the jump in gasoline prices damped the positive effect of an improving labor market.

In a separate report, existing-home sales rose in April to a near-record pace as buyers rushed to lock in relatively low mortgage rates.

Meanwhile, the latest weekly readings on retail sales showed that the steep cost of gasoline was not sapping spending too much.

Economists said the reports showed healthy consumer spending that should stay strong this year as hiring keeps improving, though another surge in already steep gas prices could pose a threat.

With the economy firmly rebounding and pushing inflation higher, the Federal Reserve is widely expected to begin raising interest rates in June from a 46-year low of 1%, the first tightening in four years.

“Between the brightening outlook for the domestic economy on the positive side and the sharply negative confidence elements in the Mideast, this net improvement is really a good performance,” said Pierre Ellis, senior international economist at Decision Economics Inc. in New York.

The Conference Board’s survey found that a bigger number of respondents said that jobs were hard to get in May -- at 30.6% compared with 28.0% in April -- even though the economy has added about 900,000 jobs since January. But consumers also felt more confident of a better labor market six months from now.

Although consumers have consistently expressed worries about the job market, war in Iraq and now soaring gasoline prices, that has not slowed their purchases of homes.

Sales of existing homes rose 2.5% in April to a seasonally adjusted annual rate of 6.64 million, the second-highest level on record, according to the National Assn. of Realtors.

Inventories of existing homes jumped to 2.57 million units, up from 2.35 million in March and the highest level since August 1990. At the current sales pace, there was a 4.6-month supply of homes available for sale.

This month, consumers are still turning up at retailers and even paying full price for spring and summer apparel as stores regain pricing power.

Sales at U.S. chain stores fell 0.5% in the week ended Saturday, according to the International Council of Shopping Centers and UBS. But sales have been running at a 5.5% gain this month over a year ago, prompting the group to lift its forecast for the month to a 5% increase from 4.5%.

The shopping center group also found that heftier gasoline prices have not slowed spending habits much.

In a separate survey, 58% of households said they had not cut back on discretionary spending because of higher fuel prices; 40% said they did reduce spending.