Tag Archives: consumer confidence

Inflation worries, pandemic curb U.S. consumer confidence; house prices cooling

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. consumer confidence dropped to a nine-month low in November amid worries about the rising cost of living and pandemic fatigue, but that probably does not change expectations for stronger economic growth this quarter.

The survey from the Conference Board on Tuesday showed consumers less enthusiastic about buying a home and big-ticket items such as motor vehicles and major household appliances over the next six months. But consumers held strong views of the labor market, with the gap between those saying jobs are plentiful versus hard to get widening to a record high.

“This isn’t a cause for concern as the relationship between spending and sentiment is loose, particularly in the short-run,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania. “The good news is that consumers’ assessment of the labor market improved in November, pointing toward further acceleration in job growth.”

The Conference Board said its consumer confidence index fell to a reading of 109.5 this month, the lowest reading since February, from 111.6 in October. The survey was conducted before the discovery of Omicron, a new COVID-19 variant, that was announced last week by South African scientists.

Economists polled by Reuters had forecast the index falling to 111.0. The measure, which places more emphasis on the labor market, has dropped from a peak of 128.9 in June. The fall was less than that of the University of Michigan’s survey of consumer sentiment, which dropped to a decade low this month.

Data this month have suggested that the economy was accelerating in the fourth quarter, with consumer spending surging in October. But the outlook for next year has been clouded by the Omicron variant, which has since been detected in several countries outside the southern African region.

Not much is known about how contagious or vaccine resistant the Omicron variant is. The Conference Board’s so-called labor market differential, derived from data on respondents’ views on whether jobs are plentiful or hard to get, jumped to a reading of 46.9 this month, the highest on record, from 43.8 in October.

This measure closely correlates to the unemployment rate in the Labor Department’s closely watched employment report.

Combined with declining new claims for unemployment benefits, it raises hopes that job growth accelerated further this month, though a shortage of workers remains a challenge. There were 10.4 million job openings at the end of September.

INFLATION FEARS MOUNT

Consumers’ inflation expectations over the next 12 months surged to 7.6% in November from 7.1% last month. Federal Reserve Chair Jerome Powell told lawmakers on Tuesday that the higher prices were generally related to the pandemic, and warned that the risk of higher inflation had increased.

Stocks on Wall Street were trading lower on Powell’s inflation comments. The dollar rose against a basket of currencies. U.S. Treasury prices were mixed.

Rising inflation is starting to influence consumers’ spending decisions, the Conference Board survey suggested.

Buying intentions for motor vehicles fell as did plans to purchase household appliances, television sets and refrigerators over the next six months. But intentions to buy washing machines and clothes dryers rose.

The survey also showed consumers less inclined to buy a house over the next six months. Slowing demand could help to further cool house price inflation.

A second report on Tuesday showed the S&P CoreLogic Case-Shiller’s 20 metropolitan area home price index rose 19.1% on a year-on-year basis in September after advancing 19.6 %in August.

Signs that house price growth was moderating were evident in a third report from the Federal Housing Finance Agency that showed house prices rose 17.7% in the 12 months through September after powering ahead 18.5% in August.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci)

U.S. consumer confidence hits seven-month low; goods trade deficit widens

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. consumer confidence fell to a seven-month low in September as a relentless rise in COVID-19 cases deepened concerns about the economy’s near-term prospects, fitting in with expectations for a slowdown in growth in the third quarter.

The survey from the Conference Board on Tuesday showed consumers less interested in buying a home and big-ticket items such as motor vehicles and major household appliances over the next six months. Consumers were also not as upbeat in their views of the labor market as in the prior month.

Economic activity has cooled in recent months as the boost from pandemic relief money faded and infections flared up, driven by the highly contagious variant of the coronavirus.

“But given that wave seems to be cresting, there’s hope confidence just hit its nadir,” said Robert Frick, corporate economist at Navy Federal Credit Union in Vienna, Virginia. “Assuming predictions of Delta dropping hold true, this setback may be a three-month trough during the recovery rally.”

The Conference Board said its consumer confidence index dropped to a reading of 109.3 this month from 115.2 in August. The third straight monthly decline pushed the index to the lowest level since February.

The measure, which places more emphasis on the labor market, has dropped 19.6 points from a peak of 128.9 in June. Economists polled by Reuters had forecast the index nudging up to 114.5.

“These back-to-back declines suggest consumers have grown more cautious and are likely to curtail spending going forward,” said Lynn Franco, senior director of economic indicators at the Conference Board in Washington.

Consumers’ inflation expectations over the next 12 months slipped to 6.5% from 6.7% last month. The Federal Reserve last week projected its key inflation measure at 3.7% this year. That was up from the 3.0% median the U.S. central bank projected back in June. The U.S. central bank has a flexible 2% inflation target.

The Conference Board’s so-called labor market differential, derived from data on respondents’ views on whether jobs are plentiful or hard to get, fell to a reading of 42.5 this month from 44.4 in August.

This measure closely correlates to the unemployment rate in the Labor Department’s closely watched employment report. September’s employment report is due to be released next Friday.

Stocks on Wall Street were trading lower. The dollar rose against a basket of currencies. U.S. Treasury prices fell.

HOUSE PRICES SURGE

Fewer households intended to buy long-lasting manufactured goods such as motor vehicles and household appliances like washing machines and clothes dryers this month. That supports expectations for a sharp slowdown in consumer spending this quarter, which will ultimately restrain economic growth.

Gross domestic product growth estimates for the third quarter are mostly below a 5% annualized rate. The economy grew at a 6.6% pace in the second quarter.

Expectations for slower GDP growth were reinforced by a separate report from the Commerce Department on Tuesday showing the goods trade deficit rose 0.9% to $87.6 billion in August as businesses imported more products to replenish inventories. Trade has subtracted from GDP growth for four straight quarters.

Imports of goods climbed 0.8% to $236.6 billion, lifted by consumer goods and industrial supplies. But imports of food, capital goods and motor vehicles fell. Motor vehicle imports were likely weighed down by a global shortage of semiconductors, which is impacting production.

Rising imports offset a 0.7% gain in goods exports to $149.0 billion, supported by industrial supplies and consumer goods. But the nation reported a decline in exports of capital goods, motor vehicles and food products. Exports are increasing as global economies continue to recover from the pandemic.

Some of the increase in imports ended up in warehouses at wholesalers and retailers. Wholesale inventories accelerated 1.2% last month after gaining 0.6% in July. Stocks at retailers edged up 0.1% after increasing 0.4% in July. Retail inventories were held back by a 1.5% tumble in stocks of motor vehicle. The drop, which followed a 0.2% gain in July, reflected shortages related to the scarcity of microchips.

Retail inventories excluding autos, which go into the calculation of GDP, rose 0.6% after advancing 0.5% in the prior month. Business inventories were sharply drawn down in the first half of the year. Last month’s increase should soften the hit to GDP growth from the widening goods trade deficit.

News on the housing market was discouraging, with the Conference Board survey showing less enthusiasm among consumers for home purchases over the next six months amid higher house prices, which are pushing homeownership out of the reach of many.

A third report on Tuesday showed the S&P CoreLogic Case-Shiller national home price index surged a record 19.7% in July from a year ago after accelerating 18.7% in June.

Sustained house price inflation was corroborated by a fourth report from the Federal Housing Finance Agency (FHFA) showing house prices soared a record 19.2% in the 12 months through July. That followed an 18.9% jump in June.

(Reporting By Lucia Mutikani; Editing by Andrea Ricci)

U.S. consumer confidence falls to 6-month low; house prices post record gains

By Lucia Mutikani

WASHINGTON (Reuters) -U.S. consumer confidence fell to a six-month low in August as concerns about soaring COVID-19 infections and higher inflation dampened the outlook for the economy.

The survey from the Conference Board on Tuesday also showed consumers were less upbeat about the labor market. They were less inclined to buy a home and big-ticket items like motor vehicles and major household appliances over the next six months, supporting the view that consumer spending will cool in the third quarter after two straight quarters of double-digit growth.

Still, more consumers planned to go on vacation, indicating a rotation in spending from goods to services was underway as economic activity continues to normalize following the upheaval caused by the coronavirus pandemic. Increased spending on services, which account for the bulk of economic activity, should keep a floor under consumer spending.

“While the resurgence of COVID-19 and inflation concerns have dampened confidence, it is too soon to conclude this decline will result in consumers significantly curtailing their spending in the months ahead,” said Lynn Franco, senior director of economic indicators at the Conference Board in Washington.

It mirrored the University of Michigan’s survey of consumers, which showed sentiment tumbling in August because of rising prices for goods like food and gasoline, as well as the resurgence in COVID-19 cases that has been driven by the Delta variant of the coronavirus.

The Conference Board’s so-called labor market differential, derived from data on respondents’ views on whether jobs are plentiful or hard to get, slipped to 42.8 this month from 44.1 in July. This measure closely correlates to the unemployment rate in the Labor Department’s closely watched employment report.

Fewer households intended to buy long-lasting manufactured goods such as motor vehicles and household appliances like washing machines and clothes dryers, the survey showed. But the share of consumers planning to go on vacations rose, with most expecting to travel domestically and many intending to fly to their destinations. That should help to offset the drag from reduced spending on goods.

Despite the anticipated slowdown, the foundation for consumer spending remains strong, with households sitting on at least $2.5 trillion in excess savings accumulated during the pandemic. Gross domestic product growth estimates for the third quarter are around a 5% annualized rate. The economy grew at a 6.6% pace in the second quarter.

Stocks on Wall Street were trading mostly lower after recent strong gains. The dollar was largely flat against a basket of currencies. U.S. Treasury prices were lower.

HOME PRICES JUMP

The Conference Board survey also showed less enthusiasm among consumers for home purchases over the next six months amid higher house prices, which are sidelining some first-time buyers from the market.

Demand for housing soared early in the pandemic as Americans sought more spacious accommodations for home offices and home schooling, but supply severely lagged, fueling house price growth. COVID-19 vaccinations have allowed some employers to recall workers to offices. Schools and universities have reopened for in-person learning.

A separate report on Tuesday showed the S&P CoreLogic Case-Shiller national home price index jumped a record 18.6% in June from a year ago after rising 16.8% in May. Economists, however, believe that house price inflation has peaked, with homes becoming less affordable especially for first-time buyers.

“Some early data suggests that the buyer frenzy experienced this spring is tapering, though many buyers still remain in the market,” said Selma Hepp, deputy chief economist at CoreLogic. “Nevertheless, less competition and more for-sale homes suggest we may be seeing the peak of home price acceleration. Going forward, home price growth may ease off but stay in the double digits through year-end.”

A separate report from the Federal Housing Finance Agency (FHFA) showed its house price index rose a record 18.8% in the 12 months through June. House prices surged 17.4% in the second quarter compared to the same period in 2020. FHFA believes house prices peaked in June.

The FHFA index is calculated by using purchase prices of houses financed with mortgages sold to or guaranteed by mortgage finance companies Fannie Mae and Freddie Mac.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

U.S. consumer confidence near 1-1/2-year high; house prices accelerate

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. consumer confidence jumped to its highest level in nearly 1-1/2 years in June as growing labor market optimism amid a reopening economy offset concerns about higher inflation.

The survey from the Conference Board on Tuesday also showed strong appetite to buy goods such as motor vehicles and household appliances, suggesting strong momentum in the economy as the second quarter ended.

Consumers were also keen to purchase homes, a sign that house prices will continue to rapidly increase as supply lags. Many intended to go on vacation, mostly in the United States, over the next six months, which should boost demand for services and add fuel to consumer spending.

“Consumer attitudes are likely to benefit from the ongoing reopening and a better health backdrop going forward that will support job growth and incomes,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics in White Plains, New York.

The Conference Board’s consumer confidence index raced to a reading of 127.3 this month, the highest level since February 2020, from 120.0 in May. Economists polled by Reuters had forecast the index at 119.0.

The survey places more emphasis on the labor market, which is steadily recovering. More than 150 million Americans have been fully vaccinated against the coronavirus, allowing for broader economic re-engagement.

The survey’s present situation measure, based on consumers’ assessment of current business and labor market conditions, increased to 157.7 from 148.7 last month. The expectations index, based on consumers’ short-term outlook for income, business and labor market conditions, rose to 107.0 from 100.9.

Consumers’ inflation expectations over the next 12 months rose to 6.7% from 6.5% last month.

Stocks on Wall Street were trading mostly higher. The dollar rose against a basket of currencies. U.S. Treasury prices fell.

STRONG LABOR MARKET VIEWS

The Conference Board survey’s so-called labor market differential, derived from data on respondents’ views on whether jobs are plentiful or hard to get, vaulted to 43.5 in June. That was the highest level since 2000 and was up from 36.9 in May.

This measure closely correlates to the unemployment rate in the Labor Department’s closely watched employment report. The jump in the so-called labor market differential augurs well for June’s employment report due out on Friday. There are a record 9.3 million job openings.

Though job growth has picked up, a shortage of willing workers is frustrating companies’ efforts to ramp up hiring. The worker shortage has been blamed on generous unemployment benefits, including a weekly $300 subsidy from the federal government. A lack of child care facilities as some centers which shut during the pandemic never reopened, is also keeping some parents home.

At least 26 states are terminating federal government-funded unemployment benefits before the Sept. 6 expiration date. This, together with school districts expected to resume in-person classes in the fall, is seen expanding the labor pool.

This month, more consumers planned to buy homes, cars and major household appliances over the next six months, relative to May. That suggests demand for so-called durable goods will remain strong even as spending shifts backs to services such as air travel, dining out and hotel accommodation.

Strong demand for homes amid a dearth of properties on the market is fueling house price inflation.

A separate report on Tuesday showed the S&P/Case Shiller composite index of 20 metropolitan areas accelerated 14.9% year-on-year in April, the largest gain since December 2005. That followed a 13.4% increase in March.

Soaring house price inflation was corroborated by another report showing the Federal Housing Finance Agency (FHFA) house price index shot up a record 15.7% in April from a year ago after rising 14.0% in March.

The FHFA’s index is calculated by using purchase prices of houses financed with mortgages sold to or guaranteed by mortgage finance companies Fannie Mae and Freddie Mac. Demand for housing is being driven by historically low mortgage rates.

Economists do not believe another housing bubble is developing, noting that the surge is being mostly driven by a mismatch between supply and demand, rather than poor lending practices, which triggered the 2008 global financial crisis. But the rapidly rising prices could feed inflation.

“Despite the pick-up in house price expectations, we don’t think a self-reinforcing bubble will form, nor do we expect values will crash,” said Sam Hall, a property economist at Capital Economics. “Rather, we think rising mortgage rates and stretched affordability will cool house price growth to around 7% year-on-year by the end of the year.”

(Reporting By Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci)

U.S. consumer confidence hits one-year high; house prices soar

By Lucia Mutikani

WASHINGTON (Reuters) -U.S. consumer confidence raced in March to its highest level since the start of the COVID-19 pandemic, supporting views that economic growth will accelerate in the coming months, driven by more fiscal stimulus and an improving public health situation.

The survey from the Conference Board on Tuesday also showed consumers were fairly upbeat about the labor market, with a measure of household employment rebounding after declining in February. Restrictions on non-essential businesses are being rolled back as more Americans get vaccinated against COVID-19.

That, along with the White House’s massive $1.9 trillion pandemic relief package, has led economists to predict the economy will this year experience it best performance in nearly four decades. The survey showed more consumers intended to buy homes, cars and household appliances over the next six months.

“Consumers finally are fully on board with the pending expansion,” said Robert Frick, corporate economist with Navy Federal Credit Union in Vienna, Virginia. “What remains to be seen is how quickly services industries such as travel and leisure will open up, allowing venues for consumers to release their pent-up demand.”

The Conference Board’s consumer confidence index jumped 19.3 points to a reading of 109.7 this month, the highest level since the onset of the pandemic in March 2020. The increase was the largest since April 2003. Confidence remains well below its lofty reading of 132.6 in February 2020. Economists polled by Reuters had forecast the index would rise to 96.9.

The survey’s present situation measure, based on consumers’ assessment of current business and labor market conditions, soared to a reading of 110.0 from 89.6 last month. The expectations index, based on consumers’ short-term outlook for income, business and labor market conditions increased to 109.6 from a reading of 90.9 in February.

Stocks on Wall Street were trading lower. The dollar rose against a basket of currencies. U.S. Treasury prices were largely lower.

INFLATION WORRIES

The survey’s so-called labor market differential, derived from data on respondents’ views on whether jobs are plentiful or hard to get, rebounded to a reading of 7.8 this month from -0.8 in February. That measure closely correlates to the unemployment rate in the Labor Department’s employment report.

That fits in with expectations for a sharp acceleration in job growth this month. According to a Reuters survey of economists, nonfarm payrolls likely increased by 639,000 jobs in March after rising by 379,000 in February. The government is due to publish its closely-watched employment report for March on Friday.

The share of consumers expecting an increase in income over the next six months rose to 15.5% from 14.8% last month. The proportion anticipating a drop increased to 13.3% from 12.9% in February. More consumers expected to purchase homes, motor vehicles and major household appliances compared to February.

Consumers’ inflation expectations over the next 12 months increased to 6.7% from 6.5% in February.

“Consumers’ renewed optimism boosted their purchasing intentions for homes, autos and several big-ticket items,” said Lynn Franco, senior director of economic indicators at the Conference Board. “However, concerns of inflation in the short-term rose, most likely due to rising prices at the pump, and may temper spending intentions in the months ahead.”

The rise in house-buying intentions suggests demand for homes could remain strong and continue to drive up prices as supply remains tight. The housing market is being powered by demand for more spacious accommodations for home offices and schooling. It remains strong despite a rise in mortgage rates this year.

A separate report on Tuesday showed the S&P CoreLogic Case-Shiller 20-metro-area house price index soared 11.1% in January from a year ago, the fastest in 15 years, after increasing 10.2% in December.

“A wave of eager buyers is being forced to act swiftly and face heightened competition for the few homes available,” said Matthew Speakman, an economist at Zillow. “The combined dynamic is pushing prices upward at their strongest pace in years, and it doesn’t appear that there is an end in sight.”

(Reporting by Lucia MutikaniEditing by Chizu Nomiyama and Paul Simao)