* Seasonally adjusted U.S. home prices up 0.9 pct in May
* Inflation-adjusted consumer spending falls in June
* Consumer confidence rises to 65.9 in July
By Leah Schnurr and Jason Lange
NEW YORK/WASHINGTON, July 31 U.S. home prices
rose for the fourth month in a row in May, suggesting the
recovery in the housing market continued to gain traction, even
as the broader economy wobbles.
Other data on Tuesday showed consumer confidence
unexpectedly rose in July but spending fell in June for the
first time in nearly a year as Americans saved more.
The S&P/Case-Shiller composite index of 20 metropolitan
areas gained 0.9 percent in May from April on a seasonally
adjusted basis, topping economists' expectations for a 0.5
The housing market, which collapsed during the 2007-2009
recession, has been a relative bright spot in the economy this
year, although it remains hobbled by tight mortgage availability
and on-going foreclosures.
"Real estate continues to show improvement off the bottom.
That's one of the few encouraging signs we've seen," said Subodh
Kumar, an investment strategist at Subodh Kumar & Associates in
On a non-seasonally adjusted basis, prices fared even
better, jumping 2.2 percent. Compared to a year ago, price
declines moderated to slip 0.7 percent, the smallest drop since
the last time year-over-year prices rose in September 2010.
Economists cautioned prices could weaken again once the
traditionally strong spring and summer buying season is over.
"The most likely scenario is that home prices will zigzag
over the coming months, rising during the selling season, and
slipping in the fall," said Michelle Valverde, U.S. economist at
IHS Global Insight.
Housing makes up a smaller share of the economy than before
the recession and can provide only a limited lift to the broader
recovery, which has hit a soft patch in the wake of the euro
zone debt crisis and a struggling domestic labor market.
The Labor Department is scheduled to release its employment
report for July on Friday, with non-farm payrolls expected to
rise a modest 100,000, according to a Reuters poll.
Pressure is rising on the Federal Reserve to do more to help
the sputtering U.S. economy as policymakers at the central bank
start a two-day meeting on Tuesday.
No major policy change is expected to be announced on
Wednesday although some economists think the Fed could push
further into the future its conditional pledge to keep rates
near zero through late 2014.
Reaction to the data was muted in financial markets as
investors had their sights set on the Fed announcement on
After growing at a 1.5 percent rate last quarter, the third
quarter could also grow below 2 percent unless there is a
positive surprise, such as action by policymakers, said Anthony
Chan, chief economist at Chase Wealth Management in New York.
Consumer spending, which makes up about 70 percent of U.S.
economic activity, fell 0.1 percent in June after adjustment for
rising prices, the Commerce Department said in a separate
"Consumers are afraid," said Matthew Lifson, an analyst at
Cambridge Mercantile Group in Princeton, New Jersey. "This data
suggests that the U.S. economy is stagnant overall and it's just
Before adjustment for inflation, spending was flat, just
below forecasts for a 0.1 percent increase.
Frugal shoppers hit upscale leather goods maker Coach Inc
as it reported another quarter of slowing growth in
North America, hurt by the deals it needed to offer
Household income rose in June by 0.5 percent - the most in
three months - although nervous consumers socked away extra cash
by saving more.
With price-adjusted incomes rising in June and consumption
falling, the saving rate for households rose to 4.4 percent, its
highest level in a year.
Still, consumers' moods have not completely deteriorated and
a separate gauge showed confidence unexpectedly rose in July as
Americans were more optimistic about the short-term outlook than
they were about their current situations.
The Conference Board said its index of consumer attitudes
climbed to 65.9 from a upwardly revised 62.7 in June. Recent
strength in the U.S. stock market likely boosted sentiment,
Despite the improvement, confidence remains well below
levels before the financial crisis.
"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," Lynn Franco,
director of The Conference Board Consumer Research Center, said
in a statement.
In the manufacturing sector, the pace of business activity
in the U.S. Midwest rose in July, as somewhat stronger new
orders offset a weakening labor environment.
The Institute for Supply Management-Chicago business
barometer rose to 53.7 from 52.9 in June. The report comes a day
ahead of two larger national manufacturing reports.