Consumers show a bit more confidence

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The Conference Board reported Tuesday that its consumer confidence index rose to 130.7 in February, from 130.4 in January.

Economists surveyed by IFR Markets had expected a reading of 132.0 for February.

The present situation index decreased to 165.1 from 173.9 as the expectations index increased to 107.8 from 101.4 last month.

The present situation index is based on consumers’ assessment of current business and labor market conditions while the expectations index tracks consumers’ short-term outlook for income, business and labor market conditions.

“Consumer confidence improved slightly in February, following an increase in January,” said Lynn Franco, the board’s senior director of economic indicators. “Despite the decline in the present situation index, consumers continue to view current conditions quite favorably. Consumers’ short-term expectations improved, and when coupled with solid employment growth, should be enough to continue to support spending and economic growth in the near term.”

Consumers’ outlook for the labor market was mixed. The proportion expecting more jobs declined slightly to 16.2% from 16.5%, but those anticipating fewer jobs in the months ahead also decreased, to 11.1% from 12.9%.

Regarding their short-term income prospects, the percentage of consumers expecting an increase rose to 22.0% from 21.6%, while the proportion expecting a decrease declined to 6.7% from 8.0%.

Also on Tuesday, the S&P CoreLogic Case-Shiller’s U.S. national home price NSA index, covering all nine U.S. census divisions, reported a 3.8% annual gain in December, up from 3.5% in the previous month.

The 10-city composite annual increase came in at 2.4%, up from 2.0% the previous month. The 20-city composite posted a 2.9% year-over-year gain, up from 2.5% in the previous month.

Twelve of the 20 cities reported higher price increases for the year ending December 2019 versus the year ending November 2019.

The report confirms home price growth slowed considerably throughout most of 2019, with some pick-up toward the end of the year.

“The drop in mortgage rates during the past week has improved payment affordability and will bring prospective buyers into the market,” said Dr. Frank Nothaft, chief economist for CoreLogic. “If rates stay low into the spring, we expect sales volume to be the highest in 13 years, and annual home price growth to quicken.”

The national index posted a month-over-month increase of 0.1% in December, while the 10-city composite posted a 0.1% increase and the 20-city composite was flat before seasonal adjustment.

After seasonal adjustment, the national index posted a gain of 0.5% while the 10-city and 20-city composites each recorded 0.4% increases in December.

Measured from its June 2006 peak, the 10-city composite is up 2.3%. The 20-city composite has eclipsed its July 2006 peak by 5.9%. The national index is up 15.2% from its July 2006 peak.

"The U.S. housing market continued its trend of stable growth in December,” said Craig Lazzara, managing director at S&P Dow Jones Indices. “December’s results bring the national composite index to a 3.8% increase for calendar 2019. This marks eight consecutive years of increasing housing prices (an increase which is echoed in our 10- and 20-city composites).”

Philadelphia Fed
The Philadelphia Federal Reserve’s nonmanufacturing business outlook survey for February suggested continued growth in that sector of the regional economy.

The diffusion index for current general activity at the firm level rose 13 points in February to 36.1 from 23.5 in January, hitting its highest level since November 2018.

More than 52% of the firms reported increases in activity, up from 41% in January, compared with 16% that reported decreases, down from 18%.

The new orders index rose 12 points to 28.1 in February, its highest level since August 2018.

The sales/revenues index increased by double-digits for the second consecutive month, rising from 29.2 in January to 39.8 in February. Over 52% of the firms reported increases in sales/revenues, while 12% reported declines.

Dallas Fed
The Texas service sector expanded at a slower pace in February, according to business executives responding to the Dallas Federal Reserve’s service sector outlook survey.

The revenue index, a key measure of state service sector conditions, fell to 14.0 in February from 18.8 in January.

Labor market indicators reflected continued employment growth and slightly longer workweeks, the Dallas Fed said.

The employment index decreased to 6.1 from 8.4, although the part-time employment index increased to 4.1, its highest reading in over a year. The hours worked index rose to 4.4 from 3.3.

Wage pressures eased slightly, while price pressures were mixed. The wages and benefits index declined to 17.7 from 19.4, while the selling prices index fell almost nine points to 8.0 as the input prices index was largely unchanged at 26.6.

Richmond Fed
The Fifth District service sector expanded in February, according to the Richmond Federal Reserve Bank.

The indexes for revenues and demand rose to 26 and 29 from 10 and 16 in January, respectively.

Firms also reported improving local business conditions and continued growth in capital spending, the Richmond Fed said. Survey participants were optimistic that activity would be strong in the next six months.

Many service sector firms reported increases in employment and wages in February, but finding workers with the necessary skills continued to be a challenge. Firms expected these trends to continue in the coming months.

“The average growth rate of prices paid by survey participants increased in February, while that of prices received slowed, widening the gap between the two,” the Richmond Fed said. “However, firms expected growth of prices paid to slow in the near future and that of prices received to hold relatively steady.”

Looking at the manufacturing sector, the Richmond Fed said activity softened in February. According to this month’s manufacturing survey, the composite index fell to negative 2 from positive 20 in January. All three components of the composite index — shipments, new orders, and employment — moved lower.

Even though firms reported a decrease in backlog of orders, the index for local business conditions remained positive, and manufacturers were optimistic that activity would improve in the coming months.

“Survey results suggest that firms saw continued growth in employment and wages in February,” the Richmond Fed said. “However firms continued to struggle to find workers with the necessary skills, as this index dropped to negative 35. Respondents expected this struggle to continue but employment and wages to grow in the next six months.”

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Economic indicators Home prices Federal Reserve Bank of Dallas Federal Reserve Bank of Philadelphia Federal Reserve Bank of Richmond Manufacturing industry
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