EconoFACTS

April 25, 2023 | 10:50

U.S. Consumers .... Expressing Concern

Economist

Jennifer Lee

Senior Economist and Managing Director
Economics

(Read more)

Jennifer Lee

Senior Economist and Managing Director
Economics

(Read more)

Was it ....

- Recession talk?
- Debt ceiling / default talk?
- Higher-for-longer/our-job-is-not-done talk?
- All that pesky inflation?
- All the above?

Whatever the reason, Americans continued to feel a little uneasy this month. The Conference Board's consumer confidence index fell for the third time in the past four months, most recently by a larger-than-expected 2.7 pts in April to a 9-month low of 101.3. The breakdown wasn't ideal ... all the concern was centered on expectations of what the world will bring (-5.9 pts to a 9-month low of 68.1) while the present situation was better (+2.2 pts to a 2-month high of 151.1). And interestingly, inflation expectations for the next 12 months slipped, which is what the Fed wants to see.

How about jobs, given that this particular survey is based on the job market? Despite the many headlines on layoffs, the perception of the job market is still holding up very well. More respondents said "I do! I do!" when asked if they see jobs as plentiful, while fewer said "Me!" when asked who considers jobs hard to get. So, the net labor differential improved, which suggests little change to the jobless rate, which is currently parked at 3.5%, one of the lowest levels in over half a century. The April figures are out next week.

Buying intentions: Understandably, given rising concerns about the future, more respondents are starting to have a rethink of their expenses. Fewer people in the survey are considering buying a car in the next six months, or a home or major appliance. And, fewer are intending to go on vacay .....

Earlier data aren't fully reflecting these second thoughts. New home sales surged 9.6% to a one-year high of 683,000 units annualized in March, but before getting too excited, remember how volatile this series is. And, February was revised lower (to 623,000 from 640,000 initially) while January was revised higher (to 648,000 from 633,000). And sales were down in the biggest region (the South). Inventories were down for the fifth consecutive month, pushing prices up 3.2% y/y. Finally, it is also taking a little longer to sell one of those new-builds.... 2.8 months as of March, the longest since last June. (Just for the sake of comparison, the longest was 14 months back in 2009.

And, despite the turbulence in the housing market, home prices on resales climbed in February. The S&P CoreLogic Case-Shiller Home Price Index (say that quickly 3x) edged up 0.1% in the month for the biggest 20 metropolitan areas, snapping the seven-month losing streak. (Similar story for the top 10 areas, and nationwide.) From a year ago, prices slowed to +0.4%; but, still managing to stay above last year's levels. Cities such as Seattle (-1.5%), Las Vegas (-0.9%), and Detroit (-0.4%) continued to weaken, but Los Angeles (+0.6%) and Atlanta (+0.5%) perked up suddenly.

Bottom Line: Lots of information to absorb. Rates have been on the rise for over a year, and we're seeing the effects. Despite a still-tight jobs market (which is still a good thing), sticky inflation does have its consequences. The Fed can rest a bit easier ... but not until after next week.

Table 1 - United States — Consumer Confidence Index

(1985 = 100)

Source: BMO Economics, Haver Analytics