In a sign that it might have reached its bottom, consumer confidence made a slight rebound in July, its first increase of the year after six consecutive months of declines.
According to preliminary estimates released Tuesday, the Conference Board Consumer Confidence Index rose to 51.9, compared with a revised 51 in June. Last month’s Consumer Confidence Index level was the lowest in 16 years, reflecting persistent fears about the weakening economy. Wall Street had expected the index to fall further toward the 50 range in July and its small bounce helped spark a 266-point rally in the stock market.
“We do think we’ve hit a bottom and things will probably improve from here,” said Scott Hoyt, senior director of consumer economics at Moody’s Economy.com. Hoyt said energy prices are still the foremost concern on consumers’ minds and the recent falloff in oil prices steadied the index.
The two key components of the index moved in different directions in July as the Present Situation Index fell incrementally to 65.3, compared with 65.4 in June. The Expectations Index rose to 43, compared with 41.4 last month.
“While consumers remain extremely grim about short-term prospects, the modest improvement in expectations, often a harbinger of economic times to come, bears careful watching over the next few months,” said Lynn Franco, director of the Conference Board Consumer Research Center.
The poll, which samples 5,000 American households monthly, showed a consumer base pessimistic about the recent landscape. Though 13.1 percent of respondents described current business conditions as “good,” up from 11.5 percent in June, the number of respondents describing business conditions as “bad” also rose, to 32.8 percent from 31.9 percent.
Respondents’ expectations for the next six months were marginally brighter. The percentage of those expecting business conditions to be “better” in the next six months rose to 9.3 from 8.5 in June, while 32.4 percent of households polled expected conditions to be “worse,” compared with 33.5 percent last month.
The unexpected rise in consumer confidence and another drop in oil prices made for a big day on Wall Street Tuesday. The Standard & Poor’s Retail Index rose 4 percent. The Dow Jones Industrial Average gained 266.48 points and The Standard & Poor’s 500 climbed 28.82 points.