US consumer confidence slips; house prices maintain upward trend

Washington

US CONSUMER confidence fell to a 5-month low month in February, with fewer consumers planning to purchase homes, automobiles and go on vacation over the next 6 months amid concerns about the short-term economic outlook.

The survey from the Conference Board on Tuesday (Feb 22) also showed consumers' inflation expectations rising after moderating for 2 straight months.

But with the labour market rapidly churning out jobs and Covid-19 cases subsiding, the second straight monthly decline in confidence and drop in buying intentions likely do not signal a major slowdown in consumer spending.

Retail sales surged in January even as confidence ebbed.

The Conference Board said its consumer confidence index dipped to a reading of 110.5 this month, the lowest since last September, from 111.1 in January. Economists polled by Reuters had forecast the index decreasing to 110.0.

The index remains above its pandemic lows. Unlike the University of Michigan's consumer sentiment index, which fell to a decade low in mid-February, the Conference Board survey puts more emphasis on the labour market.

The Conference Board survey's measure of current conditions improved, likely because of declining coronavirus infections, driven by the Omicron variant. Its gauge of expectations for growth in the short term fell to a 5-month low, suggesting a moderation in growth in the first half.

But the economic slowdown being flagged by the survey will probably be modest, with business activity regaining speed in February as the drag from the Omicron surge diminished.

In a separate survey on Tuesday, data firm IHS Markit said its flash US Composite PMI Output Index, which tracks the manufacturing and services sectors, rebounded to a reading of 56.0 this month from 51.1 in January. It attributed the sharp rise to "employees returning from sick leave, increased travelling and greater availability of raw materials". A reading above 50 indicates growth in the private sector.

The acceleration in business activity in the survey mirrors the recent improvement in the so-called hard data like retail sales.

The Conference Board's so-called labour market differential, derived from data on respondents' views on whether jobs are plentiful or hard to get, fell to a still-high reading of 42.0 this month from 43.0 in January.

This measure correlates to the unemployment rate from the Labor Department. There were 10.9 million jobs openings at the end of December.

Consumers' inflation expectations over the next 12 months increased to 7.0 per cent from 6.8 per cent last month. With inflation expectations rising, fewer consumers expected to buy cars and other big-ticket items over the next 6 months. Consumers were also not keen on vacations, with the share planning to go on holiday over the same period the smallest since June 2021.

Plans to buy a house also fell, likely reflecting rising mortgage rates, which combined with soaring prices are making home purchasing unaffordable, especially for first-time buyers.

An acute shortage of homes is driving up prices. A third report on Tuesday showed the S&P CoreLogic Case-Shiller's 20 metropolitan area home price index rose 18.6 per cent on a year-on-year basis in December after advancing 18.3 per cent in November.

Strong house price inflation was mirrored by a fourth report from the Federal Housing Finance Agency showing house prices increased 17.6 per cent in the 12 months through December after a similar gain in November. REUTERS