30th May 2012
According to a survey published Tuesday by the Conference Board, consumer confidence in May fell to 64.9, down from 68.7 in April – its lowest level in four months as fears about the global economy and the job market turned Americans gloomy.
The findings, however, contradict Friday's survey by Thompson Reuters/University of Michigan, which showed consumer sentiment had improved in each of the past nine months.
So which one's right?
Economists say neither survey is wrong. It may simply reflect timing: The board's survey ended by May 16, before drivers saw further declines in gasoline prices, while the Michigan survey covered most of the month.
Brian Bethune, an economist at University of Amherst, said the two indexes will likely converge in the coming months.
"The truth probably lies somewhere in between," he said.
According to the Associated Press, there are several ways the surveys differ:
– Timing. The Conference Board finished its survey by May 16; the University of Michigan's continued throughout the month. That means the Conference Board likely missed some of the recent drop in gas prices. Cheaper gas helped push the University of Michigan survey higher.
– Respondents. The Conference Board surveys 3,000 people; the University of Michigan polls 500.
– Breadth. Both surveys ask similar questions about current business conditions and hiring. They also ask whether those trends will get better or worse in the future. Both surveys also ask consumers if they have plans to buy big-ticket items such as cars or homes. Overall, however, the University of Michigan survey asks more questions and yields more detailed information, economists say.
– Different impacts. Historically, the University of Michigan survey is more sensitive to changes in gas prices, says Chris Christopher, an economist at IHS Global Insight. . The Conference Board's measure reacts more to changes in the job market.
– Volatility. The Conference Board's measure is more volatile, says Chris Christopher, an economist at IHS Global Insight. It jumps higher in good times and falls further in bad times. That's why most economists urge following both surveys over time, rather than focusing on a single month.
House Prices Stabilize
Meanwhile, U.S. home prices rose for the second month in a row in March, suggesting prices are stabilizing as the housing recovery gains forward traction.
The Standard & Poor's Case Shiller composite home price index of 20 metropolitan areas gained 0.1 percent in March on a seasonally adjusted basis, though it fell shy of economists' forecasts for a gain of 0.2 percent.
"In my mind there is no question that housing has bottomed, in terms of home sales, home construction and home prices, but the recovery is still going to be very modest or very sluggish," said Mark Vitner, senior economist at Wells Fargo Securities in Charlotte, North Carolina.
Nevertheless, it's too early to say house prices have turned the corner, despite the improvement in some regions, David Blitzer, chairman of the index committee at S&P Indexes, said in a statement.
"This is what we need for a sustained recovery; monthly increases coupled with improving annual rates of change," said Blitzer.
"Once we see this on a broader level we will be able to say the market has turned around."
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