Consumer confidence, home resales on rise

Joe Richter and Carlos Torres

Tuesday, April 27, 2004 | 10:36 a.m.

U.S. consumer confidence rose in April to a three-month high and previously owned home sales increased to the second-fastest pace on record amid record job and income growth.

"We're in a fast-moving economy," said John Herrmann, chief U.S. economy at Cantor Fitzgerald LP in New York, who estimates first-quarter growth of 5.3 percent.

The New York-based Conference Board today said its confidence index rose more than forecast to 92.9 this month from 88.5 as sentiment about current economic conditions improved to the highest in almost two years. Previously owned home sales increased 5.7 percent in March to a 6.48 million annual rate, the National Association of Realtors reported today in Washington.

U.S. companies said they expect to increase hiring this year as an improving economy boosts sales, according to a semi-annual survey by the Institute for Supply Management released today. About 43 percent of manufacturers plan to increase payrolls in the balance of the year, up from the 36 percent that said so in December, the survey showed.

"Jobs are the key because you have to pay the bills," said Delos Smith, a Conference Board economist. "When non-farm payrolls rise by 308,000 in a month, it's going to help consumer confidence."

Businesses added more workers to their payrolls last month than at any time in the last four years. Some 175,000 jobs were probably added in April, according to the median estimate in a Bloomberg News survey of economists ahead of the May 7 report.

The confidence report shows the influence of the March payroll report. The percentage of Americans who said jobs were plentiful rose to 15.8 percent, which was the highest since September 2002, from 14.7 percent in March. The percentage saying that jobs are hard to get decreased to 27.6 percent, the lowest since November 2002, from 29.9 percent.

The Conference Board surveys 5,000 households about general economic conditions, their employment prospects and their spending plans. While Federal Reserve studies show only a loose correlation between confidence and consumer spending, economists watch the figures for clues about the direction of the economy.

Economists had expected the confidence index would rise to 88.5 this month, based on the median of 61 forecasts in a Bloomberg News survey, from March's previously reported reading of 88.3. Stocks rose and the benchmark 10-year Treasury note fell after the reports.

Meanwhile, the annual rate of existing home sales was second only to a 6.68 million pace in September. March purchases of previously owned homes were led by increases in the West, South and Midwest.

Countrywide Financial Corp. and other lenders say demand for mortgages grew in the first quarter, when rates on 30-year mortgages fell to the lowest average since June's record. Rates on 30-year mortgages averaged 5.69 percent through the first two months of the year, when most of the decisions were made on sales completed in March, down from 5.98 percent in the second half of 2003.

"Although interest rates are rising modestly, an improving job market is creating a favorable backdrop for home sales, but at a somewhat slower pace in the months ahead," said David Lereah, chief economist for the real-estate association.

Resales account for 85 percent of the market. U.S. sales of new homes, which provide the remainder, increased to a record 1.228 million annual rate in March, the Commerce Department reported yesterday.