US consumer confidence rose modestly in August and US homes prices gained more than expected in June, easing some worries the economy is headed for another downturn soon. Another report released on Tuesday showed the pace of growth in business activity in the US Midwest slowed in August, but economists said the data overall did not present new worries about the path of the economy.
The data shows "the economy, while it is not going on all cylinders, is also not sliding into this double-dip recession that people are concerned about," said Eric Kuby, chief investment officer at North Star Investment Management Corp in Chicago.
Financial markets, however, were reluctant to read too much into the numbers, particularly as investors awaited the release on Friday of the government's closely watched monthly report on the US labour market. Tuesday's mostly upbeat data follows a slew of disappointing economic reports in recent weeks.
The Conference Board, an industry group, on Tuesday said its index of US consumer attitudes, seen as a gauge of consumer spending, rose to 53.5 in August from an upwardly revised 51.0 in July. The median of forecasts from analysts polled by Reuters was for a reading of 50.5. Forecasts ranged from 47.5 to 55.0. Consumer spending typically accounts for about two-thirds of US economic activity and is considered critical to the recovery. US stocks were higher after the data in choppy trade. US Treasury debt prices were also higher, but pared some gains after the reports, while the US dollar was down against the yen, though it received some support from the data.
In another encouraging sign for the economy, prices of US single-family homes gained more than expected in June and rose in the second quarter. The S&P/Case Shiller composite index of 20 metropolitan areas rose 0.3 percent in June from May on a seasonally adjusted basis. The rise was better than the 0.2 percent increase expected by economists polled by Reuters, though slower than May's 0.5 percent rise.
The gain, however, likely reflected the lingering boost from homebuyer tax credits that ended in April, and economists agree the effects of buyer tax credits have largely filtered through. They say home prices will be hard-pressed to sustain these gains with unemployment still near 10 percent. The employment component of the index fell to 55.5 from 56.6 in July. New orders fell to 55.0, from 64.6. A reading above 50 indicates expansion in the regional economy. Separately, the Federal Deposit Insurance Corp said that problem loans fell in the second quarter for the first time in four years.
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