Consumer confidence in the United States unexpectedly increased in July as Americans were more upbeat about labor and economic conditions in six months than they were about their current conditions. However, consumers still remain cautious on spending, while increasing their focus on savings.
According to The Conference Board, a private research industry group, its index of consumer attitudes climbed higher to 65.9 this month, compared to an upwardly revised 62.7 in June. Economists were only expecting a figure around 61.5. Lynn Franco, director of The Conference Board Consumer Research Center, explained, “While consumers expressed greater optimism about short-term business and employment prospects, they have grown more pessimistic about their earnings. 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,” according to Reuters.
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The Commerce Department also released its latest data on personal income and consumer spending. Income increased 0.5 percent in June. Wages, which accounts for the largest component of income, also rose 0.5 percent, representing the biggest jump since March. However, Americans are not afraid of letting cash burn a hole in their pocket. Consumer spending edged slightly lower from the previous month, the second consecutive fall. Instead of spending, Americans stashed away more cash than ever before all year. The savings rate increased to a 2012 high of 4.4 percent, compared to 4 percent in May.
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The new reports on spending and savings weighed heavily on luxury related names. Shares of Tiffany & Co. (NYSE:TIF), True Religion Apparel (NASDAQ:TRLG) and Saks (NYSE:SKS) dropped 3.83 percent, 2.75 percent and 1.56 percent, respectively. In comparison, discount retailer giant Walmart (NYSE:WMT) traded relatively flat. Meanwhile, the latest financial results from Coach (NYSE:COH) echo the sluggish American economy figures.
On Tuesday, the American marketer of accessories such as handbags and clothing reported disappointing fourth quarter results. Revenue increased 12 percent to $1.16 billion, but missed estimates of $1.2 billion. Sales were strong in Asia, but North America posted slower sales growth than expected in factory stores.
“Over the fiscal fourth quarter, the economic backdrop in the U.S. clearly softened as consumer confidence and sentiment declined,” explained Lew Frankfort, chief executive officer. Same-store sales increased just 1.7 percent in North America, well below the consensus of 6 percent.
Shares of Coach dropped 19 percent to hit as low as $49.05 in morning trading. It is the lowest level for shares since last year and a far cry from their all-time high of $79.42 made in March.
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