Posted tagged ‘Consumer Spending’

U.S. Consumer Confidence Bounces Back

January 4, 2014

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This is really good news for the housing market. Rising consumer confidence will go a long way towards increasing home sales. For a more detailed look at this subject – please read the article below.

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Consumer confidence saw a boost in December on heightened optimism for the job market, the Conference Board reported Tuesday.

The group’s Consumer Confidence Index, which took a tumble following the government shutdown in October, rebounded to 78.1 from November’s revised reading of 72.0. The increase made up most—but not all—of the ground lost in the previous months, bringing the index close to its pre-shutdown level (80.2 in September).

The Present Situation Index climbed to 76.2, its highest reading since 2008. The number of consumers claiming business conditions are “good” edged down nearly 1 percentage point to 19.6 percent; however, the number of consumers saying conditions are “bad” dropped 2 points to 22.6 percent.

On the topic of labor, 12.2 percent of consumers said jobs are “plentiful” (compared to 12.0 percent in November), and 32.5 percent said jobs are “hard to get” (from 34.1 percent).

The Expectations Index also improved, rising more than eight points to 79.4.

“Looking ahead, consumers expressed a greater degree of confidence in future economic and job prospects, but were moderately more pessimistic about their earning prospects,” said Lynn Franco, director of economic indicators at the Conference Board. “Despite the many challenges throughout 2013, consumers are in better spirits today than when the year began.”

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Consumer Confidence

Housing Momentum Stalled by Cautious Consumers

December 11, 2013

This doesn’t come as a big surprise considering the unemployment rate, interest rate increases and home prices climbing. The fact that so many people think that their personal situation will get worse in the next 12 months is a little unexpected but not a great shocker. For a more detailed look at this subject – please read the article below.

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According to Fannie Mae’s November National Housing Survey, positive momentum in the housing market has slowed as Americans remain cautious about their personal finances and the overall state of the economy.

Nearly two-thirds of those surveyed believe the economy is on the wrong track. Twenty-two percent expect their personal finances to worsen during the next year, and only 45 percent expect home prices to increase within the next 12 months.

According to Doug Duncan, SVP and chief economist at Fannie Mae: “We continue to see caution as the defining feature of Americans’ attitudes toward the economy and their personal financial situation. In this environment, the housing recovery is likely to improve, but only at a gradual pace.”

Duncan continued: “Our November National Housing Survey results show a loss of momentum in expectations for home prices and personal finances. Also, the majority of consumers expecting higher mortgage rates implies a slowing of housing market momentum. As the economy continues to improve and household balance sheets for most Americans are slow to repair, we continue to see the transition to a full housing recovery as a slow process.”

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Housing Momentum Stalled

Economists Surprised by Drop in Consumer Sentiment

November 15, 2013

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How about the threat of another government shutdown looming, unemployment is still around 7.3%, the Affordable Care Act is not what was promised and scandals and lies are rampant in all phases of the government. This article just shows how far out of touch a lot of the academia really are. For a more detailed look at this subject – please read the article below.

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The University of Michigan’s preliminary Index of Consumer Sentiment report shows a drop in confidence for November—and Capital Economics’ Amna Asaf is at a loss to explain why.

The index, released jointly by the University of Michigan and Thomson Reuters, fell from 73.2 to a two-year low of 72.0 in the first November report. With the economy in a relatively healthier position compared to last month, Asaf – an economist for the macroeconomics research firm—says the decline is something of a surprise.

“The further drop in the University of Michigan’s index of consumer confidence … is hard to explain given that the government reopened, the labor market is strengthening, equity markets have rallied and gasoline prices have fallen further,” she said.

The decline in November’s headline index came from a drop in the Current Conditions Index, which fell to a 10-month low of 87.2 from 89.9 at the end of October. That index typically reflects changes in job market conditions, which—given October’s strong increase in payrolls—makes the preliminary November figures all the more puzzling, Asaf said.

Meanwhile, the Index of Consumer Expectations, which reflects changes in equity and gas prices, registered 62.3, down slightly from 62.5. Gasoline prices are hovering at year-to-date lows, and mortgage rates have also leveled out at a five-month low of around 4.30 percent, Asaf noted.

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Drop in Consumer Sentiment

Personal Income, Spending Surge in August

September 30, 2013

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It would seem that this “Surge” in income and spending could mainly be attributed to the fact that a lot of people had 5 paydays (Fridays) in August as opposed to 4 in July. This works out to, for those people that get paid on Fridays, a 20% boost in take home income for the month. Please read the article below.

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Personal income grew in August at its fastest pace since February and consumer spending grew faster than in July, the Bureau of Economic Analysis reported Friday. The growth matched economists’ forecasts of a 0.4 percent boost in income and a 0.3 percent increase in spending.BEA also revised up its estimate of both spending and income growth in July.

The report suggested strong growth in spending for the third quarter ending Monday, which would boost GDP. In the first two months of the second quarter – during which the economy grew at a seasonally adjusted annual rate of 2.5 percent – consumer outlays were essentially flat, dropping 0.2 percent in April and then increasing by the same amount in May. Spending rose 0.6 percent in June, contributing to the GDP growth.

Total employee compensation, which had fallen 0.2 percent in July, rose .04 percent or $34.2 billion in August. Wages rose an aggregate 0.4 percent or $30.4 billion in August after dropping $18.5 million. The calendar often affects wage and government transfer payments. There were four Fridays, traditional paydays, in July but five in August.

Farm income, which had struggled earlier the year due to droughts and flooding in different parts of the country, rose $7.9 billion or 6.8 percent in August, the second straight month of income growth after falling in April, May and June.

Government transfer payments – essentially Social Security and Medicare (along with a few other categories) – rose a collective 0.4 percent or $10.8 billion in August.

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Personal Income

Household Net Worth Growth Slows in Q2

September 29, 2013

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This is a great indication of how much the housing industry impacts the national economy. When home sales slow down so will the growth of net worth and vice versa. Please read the article below.

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Household net worth improved $1.3 trillion in the second quarter — half as fast as the first quarter — as real estate values grew $626.7 billion, the Federal Reserve reported Wednesday in its quarterly Flow of Funds report.

But, with a drop in mortgage debt — including home equity loans and lines of credit –- from $9.39 trillion in the first quarter to $9.34 trillion in the second, homeowner equity grew to 49.8 percent in the second quarter from 48.1 percent in the first.

Household investment in the stock market grew $265 billion in the second quarter compared with $929 billion in the first when overall net worth grew $2.8 trillion.

Owners’ equity as a percentage of real estate value has been on a steady upward trajectory since dropping to 36.3 percent in the first quarter of 2009. It rose to 45.4 percent at the end of 2012 and to 48.1 percent one quarter later. The 2.7 percentage point increase in the first quarter of this year is the fastest quarter-to-quarter growth this century. Even with the increase, though, the equity percentage remains sharply lower than 57.7 percent in 2000.

After falling $223 billion in the first quarter, disposable personal income grew $98.6 billion in the second. The first quarter drop reflected the rollback of the cut in payroll taxes which ended January 1. With the increase, second quarter disposable personal income — essentially after-tax income — was $12.39 trillion, about $130 billion less than the record $12.52 trillion in the fourth quarter last year.

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Household Net Worth

August Sees Decline in Consumer Sentiment

September 7, 2013

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High unemployment, high mortgage rate and high home prices will cause consumer confidence to fall every time. This should only be a short term trend, however. Please read the article below and let me know what you think.

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After achieving a six-year high in July, consumer confidence diminished in August—though trends still indicate an increase in consumer spending over the next year.

The Index of Consumer Sentiment, released twice monthly by Thomson Reuters and the University of Michigan, read 82.1 at the end of August, down from 85.1 in July but an improvement over August 2012’s 74.3. A preliminary report released mid-month showed the index falling to 80.0.

“The August survey indicates that the recent confidence gains have stalled as consumers await decisions on the federal budget and monetary policy,” said Richard Curtin, chief economist for Surveys of Consumers. “Unlike a year ago, consumers do not anticipate that the budgetary issues will engender a similar Congressional stalemate, but few express a great deal of confidence in the economic policies of the government.”

The Expectations Index, a measure of optimism for the year ahead, fell to 73.7 in August from July’s 76.5 but remained above last August’s 65.1. According to Surveys of Consumers, respondents were anticipated the largest income increases since November 2008. However, the median expected increase was just 0.9 percent, smaller than the expected inflation rate.

At the same time, unemployment concerns caused many consumers to question whether or not they’ll see “good” economic times anytime soon.

Meanwhile, the Current Conditions Index was 95.2 in August, down from 98.6 in July but ahead of last August’s 88.7.

While home buying attitudes decline, the group reported home selling conditions picked up, with prices judged as less favorable for buying (the worst since 2007) and more favorable for selling (the best since 2006).

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Consumer Sentiment

Commentary: Déjà vu All Over Again

August 26, 2013

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This makes a whole lot of sense. When you mix the government cutting back it’s pumping billions into the housing market it could be worse than ‘05. Please read the article below and let me know what you think.

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In the spring and early summer, more lenders, as surveyed by the Federal Reserve, said they were easing standards for mortgage loans than were tightening.

In the spring and earlier summer, the median price of an existing-single family home was increasing by an average of 1.8 percent per month as sales increased about 0.5 percent per month. Personal income, according to the Bureau of Economic Analysis, was increasing at about 0.5 percent per month.

In the spring and early summer, the Case-Shiller Home Price Index was increasing by an average of 1.5 percent per month

In the spring and earlier summer, the nation added about 230,000 jobs per month, about one quarter to one half of them retail and leisure and hospitality them retail and leisure and hospitality, the two lowest wage industry sectors tracked by the Bureau of Labor Statistics.

That was 2005, the year before the housing bubble burst brought the economy down with it.

In 2013, numbers look eerily similar:

According to the latest Federal Reserve Senior Loan Officer Survey, an average of 4.6 percent of lenders surveyed acknowledged easing lending standards for prime residential loans and 16 percent of lenders surveyed reported an increase in demand for loans to subprime borrowers.

So far this year, the median price of an existing-home has increased an average of 2.5 percent per month and sales are increasing an average of 1.4 percent per month.

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Commentary