Economy Watch: Case-Shiller Sees Another Monthly Uptick; Savings Rate Up; Consumer Confidence in Present Situation Falls

Dees Stribling, Contributing Editor

The S&P/Case-Shiller monthly Home Price Indices for May (three-month averages of March, April and May), which were released on Tuesday, showed month-over-month increases for both the 10- and 20-city composites. In fact, both were up 2.2 percent.

The upticks still represent a recent turn for U.S. residential prices, since home prices fell annually in May by 1 percent for the 10-city composite and by 0.7 percent for the 20-city composite. Still, prices rose month-over-month in every market in May, including such poster children for the housing bubble as metro Las Vegas and Phoenix.

“Seventeen of the 20 cities and both composites also saw improved annual rates of return,” David M. Blitzer, chairman of the Index Committee at S&P Dow Jones Indices, noted in a statement. “We have observed two consecutive months of increasing home prices and overall improvements in monthly and annual returns. However, we need to remember that spring and early summer are seasonally strong buying months, so this trend must continue throughout the summer and into the fall.”

 Income Edges Up, Expenditures Down

During the worst of the Great Recession, Americans saved more and spent less: an entirely rational microeconomic decision, but hard on the economy as a whole. There was an inkling of that behavior in Tuesday’s report by the Bureau of Economic Analysis on consumer income and outlays, perhaps reflecting the latest bump in the recovery road.

According to the BEA, personal income in June increased $61.8 billion, or 0.5 percent, while disposable personal income increased $52.4 billion, or 0.4 percent with disposable income being the income left over when taxes are taken care of. Real disposable income, the kind after inflation is accounted for, was up 0.3 percent.

What did Americans do with this uptick in income? Not go to the mall with quite as much enthusiasm. Also during June, personal consumption expenditures decreased $1.3 billion, or less than 0.1 percent. Not a vast drop, but not a rise to match increasing income either, which points to a little more saving.

Consumer Confidence Up

Despite the recent run of malaise, the Conference Board’s Consumer Confidence Index, which had declined in June, improved somewhat in July, according to the organization on Tuesday. The index now stands at 65.9 (1985 = 100), up from 62.7 in June. The Expectations Index improved to 79.1 from 73.4, but the Present Situation Index decreased slightly to 46.2 from 46.6 a month ago.

“Despite this month’s improvement in confidence, the overall index remains at historically low levels,” noted Conference Board director of economic indicators Lynn Franco in a statement. “Consumers’ attitude regarding current conditions was little changed in July, but their short-term expectations, which had declined last month, bounced back. Given the current economic environment—in particular the weak labor market—consumer confidence is not likely to gain any significant momentum in the coming months.”

Wall Street is still waiting on word from the FOMC, which began its two-day meeting on Tuesday. QE3 or not QE3, that is the question. In the meantime, the indices dropped a bit, with the Dow Jones Industrial Average losing 64.33 points, or 0.49 percent. The S&P 500 was down 0.43 percent and the Nasdaq declined 0.21 percent.