Americans remain gloomy about the economy

NEW YORK (AP) - July 29, 2008 Their outlook has brightened a bit, even though they remain the most gloomy about the current economy that they have been in 16 years, a private research group said Tuesday.

The New York-based Conference Board said that its Consumer Confidence Index stands at 51.9 for July - half of what it was a year ago - but the reading was slightly higher than the revised 51.0 in June and a bit better than the reading of 50 predicted by economists surveyed by Thomson/IFR. The improvement, albeit slight, also reverses a six-month slide since February.

The Expectations Index, which measures shoppers' outlook over the next six months, increased a bit to 43.0 from 41.4. The Present Situation Index, which measures their current assessment of the economy, was virtually flat at 65.3, compared to 65.4 in June.

"Consumers' assessment of current conditions was little changed, suggesting there has been no significant improvement, nor significant deterioration, in business or labor market conditions," said Lynn Franco, director of The Conference Board Consumer Research Center, in a statement.

She added, however, that while consumers remain grim about short-term prospects, the modest improvement in their outlook provides some glimmer of hope. The slight improvement in the outlook "bears careful watching over the next few months," she said.

Economists closely monitor sentiment as consumer spending represents about two-thirds of all economic activity. The reading comes as the nation's retailers are entering the critical back-to-school season, the most important period behind the holiday season.

Stocks rose Tuesday, rebounding a day after a big tumble, on the improving confidence. The Dow Jones industrial average rose 111.45, or 1.04 percent to 11,246.53 in midmorning trading.

But there was more bad news about housing Tuesday. The S&P/Case-Shiller 20-city index fell 15.8 percent in May from a year earlier, the sharpest drop since its inception in 2000. The narrower 10-city index was down 16.9 percent, its biggest drop in its 21-year history.

And the Consumer Confidence report - derived from responses received through July 22 of a representative sample of 5,000 U.S. households - showed that consumers' worries about business conditions and jobs aren't going away.

Those saying jobs are "hard to get" edged up to 30.3 percent from 29.7 percent in June, while those claiming jobs are "plentiful" declined to 13.5 percent from 14.1 percent. Consumers' outlook, while slightly improving from last month, continues to be grim.

Those anticipating business conditions to worsen over the next six months did ease a bit to 32.4 percent from 33.5 percent, while those expecting conditions to improve edged up to 9.3 percent from 8.5 percent in June. But the percent of consumers expecting fewer jobs in the months ahead increased to 37.1 percent from 35.7 percent, while those anticipating more jobs remained virtually unchanged at 8.2 percent.

Another worry is a slowing job market, because job security is key to consumers' willingness to spend. Cautious employers, uncertain about the economy and their own sales prospects, have cut jobs each month so far this year. Economists are bracing for more job losses when the government releases the employment report for July on Friday.

Economists expect payrolls to drop by 72,000 in July, which would mark deeper cuts than the 62,000 logged in June. The unemployment rate, now at 5.5 percent, probably will climb to 5.6 percent. The jobless rate is expected to keep moving higher this year and next, hitting 6 percent or more early next year.

The Consumer Confidence survey has a margin of error of plus or minus 2.5 percentage points.