Signs of "Consumer Euphoria" --???>
June 30, 1999
"Consumer Confidence Is Highest Since '68"
By BLOOMBERG NEWS
WASHINGTON -- Consumer confidence
rose in June to the highest level in more
than three decades, suggesting to some that the
Federal Reserve might raise interest rates more
than once to rein in spending.
The Conference Board's index of consumer
confidence rose to 138.4 this month from 137.7
in May, the research group said today. June's
reading was the highest since October 1968. "It
looks like we are getting to the point where
euphoria is creeping into consumers' outlook,"
said Vincent Boberski, senior economist at the
brokerage firm Dain Rauscher in Minneapolis.
Still, a Commerce Department report showed
that higher borrowing costs might be starting to
cool demand in at least one part of the
economy. Sales of new single-family homes
fell 5.1 percent in May, to a seasonally adjusted
annual rate of 888,000 units, reversing much of
the 6.4 percent increase in April.
The message from the housing report is that
rising mortgage rates may be keeping home
buyers at bay, analysts said.
Consumer confidence is closely watched
because spending accounts for about
two-thirds of the gross domestic product.
Consumer spending bounded ahead in the first
quarter at the fastest pace in 11 years, bolstered
by rising incomes and stock prices, which set
highs in May.
The Federal Reserve chairman, Alan
Greenspan, suggested to members of Congress
two weeks ago that Fed policy makers might
raise interest rates pre-emptively, even with
few signs of an acceleration of inflation. While
consumer prices rose at a 2.6 percent rate in
the first five months of the year, up from a 1.6
percent increase last year, that was still lower
than the 3 percent yearly average increase in
the Consumer Price Index so far in the 1990s.
The Federal Open Market Committee, the Fed's
policy panel, began a two-day rate meeting
Wednesday, and many expect it to raise the
overnight bank-lending rate by a quarter of a
percentage point, to 5 percent. It would be the
first increase in interest rates since March 1997. |
