US consumer confidence hit a 14-month high in May as optimism about employment eased concerns about rising inflation and declining government financial support.
Although Tuesday’s Conference Board survey suggested the pace of economic growth remained robust in the second quarter, the recovery from the pandemic COVID-19 recession, which began in February 2020, is bumpy.
The housing market, one of the top performers, is showing signs of fatigue as sales of new single-family homes tumbled in April amid a shortage of properties, pushing prices up at the fastest rate in more than 15 years old.
âEconomic activity is returning to where it was before the pandemic hit,â said Joel Naroff, chief economist at Naroff Economics in the Netherlands, Pennsylvania. “So why aren’t people more exuberant? We might want to start blaming inflation.”
The Conference Board said its consumer confidence index slipped to 117.2 this month from 117.5 in April, the highest level since February 2020. Economists polled by Reuters had forecast the index at 119, 2.
Beginning in May, the Conference Board switched to an online survey from a mail-in survey. Data for January through April have been revised to reflect the results of the online survey. The pullback reflected other sentiment surveys, which were dragged down by fears that rising inflation was eroding consumers’ purchasing power.
Inflation boils as the reopening of the economy after coronavirus restrictions and massive fiscal stimulus unleashes pent-up demand, pushing against supply constraints, leading to price hikes for most some products.
The survey’s current condition measure, based on consumers’ assessment of current business and labor market conditions, rose to a 14-month high of 144.3 from 131.9 last month.
But the expectations index, based on consumers’ short-term outlook for income, business and labor market conditions, fell to 99.1 from 107.9 in April. Consumer inflation expectations over the next 12 months jumped to 6.5% from 6.2% last month.
Wall Street shares were mixed. The dollar was stable against a basket of currencies. The prices of US Treasuries have gone up.
The Conference Board’s so-called labor market gap, derived from data on respondents’ opinions on whether jobs are plentiful or hard to come by, hit a reading of 34.6 in May against 21.6 in April.
This measure, which is closely correlated with the unemployment rate in the Ministry of Labor’s closely watched employment report, is just below its peak of 38.3 in August 2019. The so-called market differential jump job this month probably reflects a record 8.1 million job openings.
This gives hope that job growth will pick up again this month. A labor shortage is hampering job growth, even as nearly 10 million Americans are officially unemployed. The worker shortage has been blamed on generous unemployment benefits, including a $ 300 weekly government grant.
The lack of child care facilities, with most schools offering partial in-person learning, along with lingering fears of the virus and retirements linked to the pandemic are also believed to contribute to the labor shortage, which has held back the workforce. hiring in April. Government-funded benefits, which are part of the $ 1.9 trillion pandemic relief program, expire in early September and school districts are expected to resume in-person classes in the fall, which economists say , will increase the labor pool.
Fewer consumers expected to buy homes, cars and major appliances in the next six months, compared to April. However, the link between these purchasing plans and consumer spending is weak.
In a separate report on Tuesday, the Commerce Department said new home sales fell 5.9% to a seasonally adjusted annual rate of 863,000 units last month. The pace of March sales has been revised down to 917,000 units from the 1.021 million units previously reported. Sales climbed 48.3% on an annual basis.
The new home market is driven by a near-record inventory of previously owned homes, particularly entry-level homes. The pandemic has fueled demand for spacious, more expensive housing as millions of Americans work from home and take distance education.
But the virus has disrupted the supply of labor at sawmills and ports, causing shortages of lumber and other raw materials, limiting the ability of builders to speed up construction of new homes to fill the gap. ‘inventory. Read more
Demographics favor the housing market. People between the ages of 26 and 34 make up about 12.5% ââof the U.S. population.
âAn increasing number of millennials are aging in their first few years of household formation, which will remain a fundamental tailwind over the next several years,â said Bernard Yaros, economist at Moody’s Analytics in West Chester, Pa.
A third report showed that the S&P CoreLogic Case-Shiller house price index rose 13.2% in March from a year ago, the biggest increase since December 2005, after rising 12, 0% in February. Read more
Soaring house price inflation was highlighted by a fourth report showing that the Federal Housing Finance Agency’s house price index jumped a record 13.9% on an annual basis in March after increasing 12.4% in February.
The White House said on Tuesday it was monitoring soaring house prices, saying it raised concerns about “accessibility and access to the housing market.”
Economists and Federal Reserve officials do not believe another real estate bubble is developing, noting that the surge is mainly due to a mismatch between supply and demand, rather than poor lending practices, which sparked the 2008 global financial crisis.
Richmond Fed Chairman Thomas Barkin said on Tuesday he did not see the leverage in the housing market “reaching levels that are still excessive.” Read more
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