Growing cases of COVID-19 decline in US consumer confidence and house prices record record gains

WASHINGTON, Aug 31 (Reuters) – US consumer confidence fell to a six-month low in August as concerns about the spread of COVID-19 infections and higher inflation diminish the prospects of the economy.

The Conference Board survey on Tuesday showed consumers less inclined to buy a home and powerful items such as motor vehicles and major appliances over the next six months, supporting the view that consumer spending will cool in the third quarter after two consecutive quarters. of robust growth.

However, there were more consumers who planned to go on holiday, which indicated that there was a rotation of spending on goods to services, as economic activity continues to normalize after the disorder caused by the coronavirus pandemic. . Increased spending on services, which account for most of economic activity, should maintain a lower floor than consumer spending.

“The report shows that if the pandemic gets worse, and given the continued unwillingness of many to get vaccinated, it’s a real possibility, we could see people losing funds just in case,” Joel Naroff said. , chief economist at Naroff Economics in the Netherlands, Pennsylvania. “We could see moderate growth faster than expected.”

The Conference Board’s consumer confidence index fell to a reading of 113.8 this month, the lowest since February, from 125.1 in July. Economists surveyed by Reuters had predicted that the index would fall to 124.0. The cut in the poll was Aug. 25, before the assassination of 13 service members in Afghanistan and Hurricane Ida killed Louisiana.

The measure, which places more emphasis on the labor market, held up well compared to other surveys. The University of Michigan consumer survey showed that sentiment fell to nearly a decade in August due to rising prices for products such as food and gasoline, as well as the resurgence of COVID cases. -19 which has been driven by the Delta variant of the coronavirus.

“While the resurgence of COVID-19 and concerns about inflation have diminished confidence, it is too early to conclude that this decline will cause consumers to significantly reduce their spending in the coming months,” said Lynn Franco, director of economic indicators from the Conference Board in Washington.

Consumer inflation expectations over the next twelve months rose to 6.8% from 6.6% last month. However, there are indications that price pressures have peaked, with data from last week showing that the Federal Reserve’s preferred inflation measure recorded its lowest gain in five months in July. Read more

Major Wall Street indices hovered around record highs. The dollar (.DXY) was steady against a basket of currencies. US Treasury prices were lower.

COMPLETION OF THE LABOR MARKET

The Conference Board’s so-called labor market differential, derived from data on respondents’ views on whether jobs are plentiful or difficult to obtain, was reduced to a still high reading of 42.8 this month from 44, 1 in July, which was the highest since July 2000.

This measure is closely correlated with the unemployment rate in the Department of Labor’s employment report.

“It continues to send a pretty favorable signal about labor market conditions,” said Daniel Silver, an economist at JPMorgan in New York.

Non-farm payrolls likely rose 750,000 in August after rising 943,000 in July, according to a survey of Reuters economists. The unemployment rate is expected to fall to 5.2%, from 5.4% last month.

While fewer households plan to buy long-lasting manufactured goods, such as motor vehicles and appliances such as washing machines and clothes dryers, this month they are expected to travel nationwide, and many plan to fly to their destinations.

Households accumulated at least $ 2.5 trillion in excess savings during the pandemic, laying a solid foundation for consumer spending. Gross domestic product growth estimates for the third quarter are around 5% annualized. The economy grew at a rate of 6.6% in the second quarter.

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

Demand for housing soared in the early days of the pandemic, as Americans sought more accommodation for home offices and home schooling, but supply lagged far behind and fueled price growth. of the houses. Vaccines against COVID-19 have allowed some employers to remove workers from offices. Schools and universities have reopened for face-to-face learning.

A separate report on Tuesday showed that the national S&P CoreLogic Case-Shiller home price index jumped a record 18.6% in June from last year 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 easing, although many buyers remain in the market,” said Selma Hepp, chief economist at CoreLogic. “However, less competition and more homes for sale suggest that we may see the peak of house price acceleration. In the future, house price growth may slow, but will remain at both digits until the end of the year “.

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

Report by Lucia Mutikani; Additional reports by Evan Sully; Edited by Paul Simao and Andrea Ricci

Our standards: the principles of trust of Thomson Reuters.