Q1 GDP: Inclement Weather Sharply Weakened Growth But Outlook Remains Positive

April 30, 2014

The U.S. Bureau of Economic Analysis today reported 0.1 percent annualized growth in real Gross Domestic Product for the first quarter of 2014.

Economic growth in the first quarter was disappointing, beyond the anticipated slowdown related to the brutal winter weather conditions affecting major parts of the nation.  Based on these preliminary estimates, inclement weather had an even more negative impact than analysts had calculated.  Despite positive growth effects from continued consumer spending, these were offset by a strong decline in investments in residential and non-residential structures, and a sharp decline in exports.  However, there is little reason to expect a continued sub-par performance.  The strength in consumer spending in the first quarter is expected to continue into the second quarter.  In going forward, we receive similar positive signals from The Conference Board Leading Economic Index.  If the economy can deliver as much as 3 percent growth in the second quarter, and open more than 200,000 new jobs per month, it will help set the stage for a strong third-quarter performance.  In short, after a very disappointing first quarter, the economy, freed from headwinds such as a weak housing market or budget squabbles, and buoyed by catch up, low inflation and low interest rates, could finally realize its potential underlying dynamism.  That's a more positive outlook than any time during the past five-year-post-recession period since 2009.

Source: The Conference Board

The Conference Board Consumer Confidence Index Falls Slightly In April

April 29, 2014

The Conference Board Consumer Confidence Index, which had increased in March, declined slightly in April.  The Index now stands at 82.3, down from 83.9 in March.  The Present Situation Index decreased to 78.3 from 82.5, while the Expectations Index was virtually unchanged at 84.9 versus 84.8 in March.

"Consumer confidence declined slightly in April, as consumers assessed current business and labor market conditions less favorably than in March," said Lynn Franco, Director of Economic Indicators at The Conference Board.  "However, their expectations regarding the short-term outlook for the economy and labor market held steady.  Thus, while sentiment regarding current conditions may have slipped a bit, consumers do not foresee the economy, or the labor market, losing the momentum that has been building up over the past several months."

Consumers' appraisal of current conditions pulled back moderately in April.  Those claiming business conditions are "good" edged down to 21.8 percent from 22.6 percent, while those claiming business conditions are "bad" rose to 24.4 percent from 23.5 percent.  Consumers' assessment of the labor market was also slightly more negative.  Those stating jobs are "plentiful" declined to 12.9 percent from 13.8 percent, while those saying jobs are "hard to get" increased to 32.5 percent from 31.4 percent.

Consumers' expectations held steady in April.  The percentage of consumers expecting business conditions to improve over the next six months was unchanged at 17.4 percent, while those anticipating business conditions to worsen increased marginally to 10.3 percent from 10.1 percent.  Consumers were slightly more optimistic about the outlook for the labor market.  Those expecting more jobs in the months ahead increased to 15.0 from 14.1 percent, while those expecting fewer jobs edged up to 17.9 percent from 17.5 percent.  The proportion of consumers anticipating their incomes to grow increased to 17.1 percent from 15.3 percent, but those expecting a drop in their incomes also increased, to 12.9 percent from 11.5 percent.

Source: The Conference Board

Are U.S. Consumers Done With Deleveraging?

April 25, 2014

Probably.  Starting in 2007, U.S. consumers began to build up savings, and pay off more old debt than the amount of new credit card, mortgage, or other household debt they incurred.  Of course, this had the impact of delaying the replacement of old vehicles or household appliances and furniture.  The bottom line, then, was a prolonged period of very slow growth in consumer spending.

Almost seven years later, household balance sheets are in much better shape.  Not so the stock of household goods.  If consumers are now more confident they will be able to pay off debt, sales of furniture and appliances could accelerate as early as this spring.  And this boost in consumer spending might even be enough to send overall GDP above 3 percent (annualized) and send job growth above 200,000 per month.

Is deleveraging over?  The ratio of household debt to income peaked at 129 percent in 2007.  By the fourth quarter of 2013, it was down to 104 percent - more the result of lower mortgage debt than any other factor.  Statisticians at the Federal Reserve in New York tried to calculate an equilibrium ratio of debt to income (based on factors like the ratio of mortgage debt outstanding to home price, mortgage rates, other collateral, income and income expectations, and so on).

Not only was the debt-to-income ratio down by the end of last year, but the actual ratio was closer to the calculated ratio configured by these Federal Reserve statistics.  In other words, excessive household debt was lower, reaching a more manageable level (given the current state of borrowing costs, mortgage and otherwise).  Therefore, if job growth maintains its current pace, and interest rates do not rise much, there could be a spurt in shopping this spring.

Does that mean saving rates will go down?  If job and wage growth accelerate, consumer spending might go through a spurt without any drop in the saving rate.  Like all economic forecasts, there are a lot of ifs, but the outlook looks more favorable than it has since the end of the Great Recession.

Source: The Conference Board

So Long Winter. Retail Sales Spring Up In March

April 14, 2014

Warmer spring weather spurred continued consumer spending and activity this March.  According to the National Retail Federation, March retail sales, which exclude automobiles, gas stations and restaurants, increased 0.8% adjusted month-to-month and 1.6% unadjusted year-over-year.

"Consumers shed their winter coats last month for fresh, spring merchandise," NRF president and CEO Matthew Shay said.  "Retail sales increased in most categories and sectors as consumers took to stores to purchase new spring attire and home furnishings in hopeful expectation of warmer weather.  Sales should continue to remain positive this spring with the approach of Easter and expected tax refunds."

Earlier this month, NRF's Easter Spending Survey reported that the average American consumer will spend $137.46 this Easter holiday on clothing, candy, gifts and more, with total spending reaching $15.9 billion.

March retail sales, released today by the U.S. Census Bureau, which include categories such as automobiles, gasoline stations, and restaurants, increased 1.1% seasonally adjusted month-to-month ($433.9 billion).  The Census also reported that retail sales increased 2.8% adjusted year-over-year.

"Improving economic conditions and consumer confidence should push consumers to return to spending habits this spring," NRF chief economist Jack Kleinhenz said.  "Consumers released some pent-up demand in March after two consecutive months of harsh winter weather that not only hampered employment opportunities but also retail sales.  We remain optimistic that retail sales will continue their positive march this spring."

Additional findings from NRF's retail sales report include:

• Building material and garden equipment and supplies dealers stores' sales increased 1.8% seasonally-adjusted month-to-month and 6.2% unadjusted year-over-year.
• Clothing and clothing accessories stores' sales increased 1.0% seasonally-adjusted month-to-month yet decreased 2.3% unadjusted year-over-year.
• Electronics and appliance stores' sales decreased 1.6% seasonally-adjusted month-to-month and 2% unadjusted year-over-year.
• Furniture and home furnishing stores' sales increased 1% seasonally-adjusted month-to-month and 1% unadjusted year-over-year.
• General merchandise stores' sales increased 1.9% seasonally-adjusted month-to-month yet decreased 0.2% unadjusted year-over-year.
• Health and personal care stores' sales increased 0.3% seasonally-adjusted month-to-month and 4% unadjusted year-over-year.
• Nonstore retailers' sales increased 1.7% seasonally-adjusted month-to-month and 8% unadjusted year-over-year.
• Sporting goods, hobby, book and music stores' sales increased 0.3% seasonally-adjusted month-to-month yet decreased 5.5% unadjusted year-over-year.

Source: Retailing Today

Easter Sales Decline And Shift Online

April 9, 2014

Average spending per person is forecast to decline this Easter, despite pent up demand from a long cold winter.  

According to new consumer research from the National Retail Federation, fewer people will celebrate Easter this year and average spending per person will decline to $137 from $145 last year.  Total spending is expected to reach roughly $15.9 billion.  A key reason for the decline is that the number of Americans who said they plan to celebrate Easter fell to 80.3% this year compared to 83% last year.

"The winter doldrums left consumers with a lot of pent up demand, and though many Americans may take a cautious approach to spending on Easter items this year, retailers are anticipating that warmer weather will easily put consumers in the mood to buy bright clothes, holiday decorations and more," said NRF president and CEO Matthew Shay.  "As one of the biggest holidays of the year, retailers are looking forward to increased customer traffic in stores and online, and will roll out promotions on everything from garden supplies and patio sets to apparel and grocery items as they help their customer prepare for the holiday."

Though fewer Americans will celebrate this year, families are still looking forward to their traditional Sunday meals.  Those who do plan to celebrate will spend the most on a grocery bill for a family dinner or Sunday brunch out; according to the survey, 85.7 percent of those celebrating will spend an average of $43.18 on a holiday meal, totaling $5 billion.

Since the holiday traditionally marks the ceremonial start to spring, 42.9 percent will purchase new spring attire, spending an average of $22.71; total spending on apparel is expected to reach $2.6 billion.  Additionally, nine in ten (89.3%) of those celebrating will stock up on Easter candy, spending a total of $2.2 billion.  Families will also spend on gifts ($2.4 billion), flowers ($1.1 billion) and decorations ($1.1 billion).

Another notable shift relates to the number of people who now indicate that smartphones and tablets will play a greater role in their Easter decision-making.  Roughly one-third of those who own tablets said they would use the device to research products and compare prices, with the behavior most pronounced in the 18-24 year old age bracket, where 44% plan to use their tablets.  A similar phenomenon was evident with smartphones, where 23.4% of overall respondents said they would use their devices to research products, while 37.1% of those 18-24 plan to do so.

Many will use their smartphones to check off their Easter shopping list.  Of those who own smartphones, nearly one in four (23.4%) will use their device to research products or compare prices.  Just 12.2 percent will make an actual purchase with their smartphone.  Nearly one in five (19.2%) tablet owners will make a purchase on their device, but most will simply research holiday gifts, apparel and other items (30.2%).

"Americans are eager to dip their toes in the fresh green grass this Easter and celebrate the day with friends and family," said Prosper Insights and Analytics director Pam Goodfellow.  "Though they are planning to trim their budgets in terms of spending on food, clothes and gifts, most will look for personal and fun items that won't break the bank in order to enjoy the day."

 Sources: National Retail Fereration and Retailing Today

Labor Market Improving, Together With A Little Catch Up

April 4, 2014

The economy generated a gain of 192,000 jobs in March.  Undoubtedly, there was some catch up in hiring following the inclement weather this winter.  Still, the underlying hiring trend is encouraging, with more good news expected this spring and summer.  This confirms the signals from The Conference Board's Consumer Confidence Index and Leading Economic Index for the U.S.  More jobs means more pay checks, lifting sentiment and resulting in more consumer buying.  If demand is improving, business will respond by investing so as to supply the goods and services in demand.  The key, as always, is sustained job gains in the service sector including health and education.  If these numbers continue, the much-anticipated strengthening of the economy may materialize sooner rather than later.

Source: The Conference Board

The Wealth Effect And Consumer Spending

March 26, 2014

A recent Federal Reserve report shows that household finances have regained substantial ground since the Great Recession, driven largely by the run-up in home values and surge in stocks.  These positive forces have contributed to the highest level of wealth in our history - the net worth of U.S. households and nonprofits reached $80.7 trillion by the end of 2013.

The effect of wealth on consumption is an issue of longstanding interest to economists, which has sparked interesting research and debate.  As wealth accumulates, consumers increase confidence, and with it, consumer spending and the use of credit.  Based on this reasoning, economists are anticipating further growth and gains this year. 

However, not all wealth is created equal, and its impact on consumption and spending varies.  Housing prices have a larger role in consumer spending compared with financial wealth like stocks and bonds.  Here's how.

Housing Prices

As home prices rise, households regain equity (they owe less on their mortgage than the value of their home).  As a result, they may find it easier to sell, refinance or borrow.  Overall, equity as a share of real estate has reached 51.7%, the highest point since the recession.

The key to increased spending, though, is how individuals turn rising home values into cash.  How much depends on how easily individuals can borrow and the desire by banks to lend.  For every dollar increase in housing values, research has estimated that consumption increases between 6 and 9 cents.

Stocks and Bonds

Stocks and bonds amount to 35 percent of net worth, and are at the highest level in 15 years.  Compared with housing wealth, financial wealth is readily accessible and much easier to convert into cash.  With this ease, you might think its impact on spending would be larger than housing.  However, research has found just the opposite.  For every dollar change in financial wealth, consumer spending tends to only increase by 2 to 4 cents.

The reduced impact of financial wealth is largely due to the fact that it is not shared as broadly as housing wealth.  There are many more Americans with homes than financial investments.  However, some analysts believe that the wealth and consumption relationship may not stem from the direct effect of financial wealth on spending, but rather from a signaling channel.  That is, as stock prices rise and fall, household optimism about the economy may cause households to revise their expectations about their future wages and consumption.

Optimistic Expectations

In the coming months, higher home and equity values (the wealth effect) combined with the use of consumer credit, should add to the pace of consumer spending.  While take-home pay remains the primary source of consumer spending, access to credit also plays a large role into economic activity.

Even though consumers have taken advantage of extremely low interest rates to purchase big ticket items, that doesn't mean households are returning to pre-Great Recession spending habits.  It appears that there is more responsible borrowing on the part of consumers.  Credit card use has been extremely tepid as consumers remain hesitant to return to 2007-2008 behavior.  If consumers remain hesitant, their improved finances may not lead to big gains in spending.

I remain optimistic about consumer spending this year thanks to better employment prospects, a strengthening balance sheet and an expected uptick in after-tax income that makes it easier to finance debt dependent purchases.

This optimism is tempered with the reality that rising interest rates could otherwise thwart consumer attitudes toward spending and borrowing.  If interest rates begin to rise, it would make it more expensive for households to access and utilize credit and limit the increase in home prices.  Alternatively, if interest rates remain steady as we expect, consumers should gain more confidence as the employment situation improves, spurring additional spending and economic activity throughout 2014.

Source: National Retail Federation

The Conference Board Consumer Confidence Index Rebounds In March

March 25, 2014

The Conference Board Consumer Confidence Index, which had decreased in February, improved in March.  The Index now stands at 82.3, up from 78.3 in February.  The Present Situation Index edged down to 80.4 from 81.0, while the Expectations Index increased to 83.5 from 76.5.

"Consumer confidence improved in March, as expectations for the short-term outlook bounced back from February's decline," said Lynn Franco, Director of Economic indicators at The Conference Board.  "While consumers were moderately more upbeat about future job prospects and the overall economy, they were less optimistic about income growth.  The Present Situation index, which had been on an upward trend for the past four months, was relatively unchanged in March.  Overall, consumers expect the economy to continue improving and believe it may even pick up a little steam in the months ahead."

Consumers' assessment of current conditions was little changed in March.  Those claiming business conditions are "good" increased to 22.9 percent from 21.2 percent; however, those claiming business conditions are "bad" also rose, to 23.2 percent from 22.0 percent.  Consumers' appraisal of the labor market was relatively unchanged.  Those claiming jobs are "plentiful" decreased marginally to 13.1 percent from 13.4 percent, while those saying jobs are "hard to get" increased slightly to 33.0 percent from 32.4 percent.

Consumers' expectations, which fell last month, rebounded in March.  The percentage of consumers expecting business conditions to improve over the next six months increased to 18.1 percent from 17.3 percent, while those anticipating business conditions to worsen declined to 10.2 percent from 13.6 percent.  Consumers' outlook for the labor market was also moderately more optimistic.  Those expecting more jobs in the months ahead edged up to 13.9 percent from 13.7 percent, while those expecting fewer jobs fell to 18.0 percent from 20.9 percent.  The proportion of consumers expecting their incomes to grow declined to 14.9 from 15.8 percent, but those anticipating a decline in their incomes also decreased to 12.1 percent from 13.4 percent.

Source: The Conference Board

Shopping Paused This Winter, Will Pick Up This Spring

March 13, 2014

Consumer spending on retail sales rose a healthy 0.3 percent in February, despite widespread inclement weather.  This good result essentially offsets the declines registered in January.  The core retail sales measure that excludes autos, building materials and gasoline also advanced a solid 0.3 percent supporting consumer spending in Q1.  Online store sales rose a robust 1.2 percent, as shoppers turned to the internet given the inclement weather in the month.  Although there is some lingering uncertainty about the strength of the labor market going forward - delivering more jobs and perhaps higher wages.  There could be a further bounce this spring as some shoppers finally get out as warmer weather arrives.  Still, the direction of the consumer market for the remainder of the year is more dependent on the strength of the labor market.  The upscale market is and will continue to do fine.  For the mid to lower-scale retail market, better weather could mean a little better sales record but sales are likely still to be constrained on the upside by sluggish wage gains.

Source: The Conference Board

Labor Market Holding Up At A Reasonable Rate

March 7, 2014

The economy generated a gain of 175,000 jobs in February.  Whether that is enough to dissipate uncertainty about where the economy is headed this year remains the big question.  Even though the number of workers unable to report to work due to inclement weather increased strongly, and average weekly hours declined, the number of construction jobs continued to increase at a moderate rate.  Going forward we see things improving as many of the underlying fundamentals of the economy have continued to improve.  The Conference Board Leading Economic Index and the latest reading from the survey of purchasing managers point to strengthening conditions over the next few months.  Catch up from weather-delayed plans could push job gains over 200,000 per month.  And more jobs mean more paychecks, lifting consumer confidence and sending consumers out shopping once the weather improves.  If demand is improving, business will respond by investing so as to supply the goods and services in demand.  In sum, we look for a spring thaw to warm up the economic readings, including most notable employment and housing indicators.

Source: The Conference Board

The Conference Board Consumer Confidence Index Declines Moderately

February 25, 2014

The Conference Board Consumer Confidence Index, which had increased in January, fell moderately in February.  The Index now stands at 78.1, down from 79.4 in January.  The decline was driven by the Expectations Index, which dropped to 75.7 from 80.8.  The Present Situation Index, by contrast, climbed from 77.3 to 81.7.

"Consumer confidence declined moderately in February, on concern over the short-term outlook for business conditions, jobs, and earnings," said Lynn Franco, Director of Economic Indicators at The Conference Board.  "While expectations have fluctuated over recent months, current conditions have continued to trend upward and the Present Situation Index is now at its highest level in almost six years (April 2008, 81.9).  This suggests that consumers believe the economy has improved, but they do not foresee it gaining considerable momentum in the months ahead."

Consumers' appraisal of current conditions improved for the fourth consecutive month.  Those claiming business conditions are "good" increased to 21.5 percent from 20.8 percent, while those claiming business conditions are "bad" declined to 22.6 percent from 23.4 percent.  Consumers' assessment of the labor market also improved.  Those claiming jobs are "plentiful" increased to 13.9 percent from 12.5 percent, while those saying jobs are "hard to get" decreased slightly to 32.5 percent from 32.7 percent.

Consumers' expectations, which had been improving over the past two months, retreated in February.  The percentage of consumers expecting business conditions to improve over the next six months decreased to 16.3 percent from 17.0 percent, while those anticipating business conditions to worsen increased to 13.3 percent from 12.2 percent.  Consumers' outlook for the labor market was also more pessimistic.  Those expecting more jobs in the months ahead declined to 13.3 percent from 15.1 percent, while those anticipating fewer jobs increased to 20.6 percent from 19.0 percent.  The proportion of consumers expecting their incomes to increase declined from 16.6 percent to 15.4 percent, but those anticipating a decrease in their incomes also declined, from 13.9 percent to 13.1 percent.

Source: The Conference Board

More Consumers Will Hold Onto Those Tax Refunds

February 19, 2014

More Americans this year are expected to put their tax returns in the bank.  According to the National Retail Federation's Tax Returns Survey conducted by Prosper Insights & Analytics, 46% of those expecting a refund this year will put their money into savings, up from 44% last year and the highest percent in the survey's history.

Two-thirds (66.6%) of those surveyed are expecting a refund this year.  As for other ways consumers will use their refunds, 37.7% will pay down debt, and one-quarter (25.3%) will use it toward everyday expenses.  One in ten (10.7%) will treat themselves and invest in a major purchase, and 12.8% will spend their refunds on a vacation.

Young adults between 18 and 24 are most likely to save their tax returns, with nearly six in ten (57.7%) planning to contribute to their savings accounts, higher than any other age group.  They are also the most likely to use their refunds for everyday expenses (34%) and to purchase a big ticket item such as a new television or piece of furniture (18.3%).  Three in ten (30.2%) will use their checks to pay down debt, second to last behind those 65 and older (27%).

"Financial security is top of mind for all Americans, and refunds can play a huge role in helping achieve that," said NRF president and CEO Matthew Shay.  "Whether consumers use a refund to pay down debt, bulk up their savings, or buy that big ticket item they've been saving for, a check from Uncle Sam, large or small, goes a long way these days."

Source: Retailing Today 

Poor Weather Puts A Damper On Builder Confidence In February

February 18, 2014

Unusually severe weather conditions across much of the nation along with continued concerns over the cost and availability of labor and lots caused builder confidence in the market for newly-built, single-family homes to post a 10-point drop to 46 on the National Association of Home Builders/Wells Fargo Housing Market Index, released today.

"Significant weather conditions across most of the country led to a decline in buyer traffic last month," said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Delaware.  "Builders also have additional concerns about meeting ongoing and future demand due to a shortage of lots and labor."

"Clearly, constraints on the supply chain for building materials, developed lots and skilled workers are making builders worry," said NAHB Chief Economist David Crowe.  "The weather also hurt retail and auto sales and this had a contributing effect on demand for new homes."

Derived from a monthly survey that NAHB has been conducting for 25 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales expectations for the next six months as "good", "fair" or "poor".  The survey also asks builders to rate traffic of prospective buyers as "high to very high", "average" or "low to very low".  Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

Looking at three-month moving averages for regional HMI scores, the West was unchanged at 63 in February while the Midwest registered a one-point decline to 57, the South registered a three-point decline to 53 and the Northeast posted a four-point decline to 38. 

More information on housing statistics is available at housingeconomics.com.

Source: National Association of Home Builders

Consumers Won't Splurge On Cupid This Valentine's Day

February 4, 2014

On the heels of a healthy yet modest holiday shopping season, cautious consumers aren't quite ready to splurge on Valentine's Day this year, continuing to keep their budgets in check.

According to the National Retail Federation's 2014 Valentine's Day spending survey conducted by Prosper Insights and Analytics, 54% of Americans will celebrate with their loved ones this year, compared to 60% in 2013.  The average person plans to spend $133 on candy, cards, gifts, dinner and more, up slightly from $130.97 last year.  Total spending is expected to reach $17.3 billion.

Valentine's Day will continue to be a popular gift-giving event, even when consumers are frugal with their budgets.  This is the one day of the year when millions find a way to show their loved ones they care," said NRF president and CEO Matthew Shay.  "Consumers can expect Cupid's holiday to resemble the promotional holiday season we saw just a few months ago, as retailers recognize that their customers are still looking for the biggest bang for their buck."

Gift-givers will find the perfect gift for their loved ones that fits their budget, whether it's candy, flowers, jewelry, clothing, an evening out or simply a greeting card.  Nearly half (48.7%) will buy candy, a third (37.3%) will give flowers and more than half (51.2%) will send greeting cards.  Nineteen percent will treat their significant other to something sparkly - jewelry spending will total $3.9 billion, and 37% will celebrate with an evening out, spending an estimated total of $3.5 billion.  Others will give more practical gifts like clothing (15.8%) or gift cards (14%) so their loved ones can have that item they've been eyeing in the store.

Men will spend $108.38 on gifts for their significant others - twice as much as women who will spend $49.41 on their special someone.  But Valentine's Day isn't just for couples; people will show their appreciation for family members (59.4%), friends (21.7%), teachers (20.4%) and colleagues (12.1%).  And like every holiday, Americans won't forget about their pets with 19.4% buying gifts for their furry friends, spending an average of $5.51.

"While fewer are planning to celebrate Valentine's Day this year, millions of shoppers will still make room in their discretionary budgets to send cards and gifts to loved ones or enjoy a special evening out," says Prosper Insights and Analytics Director Pam Goodfellow.  "Consumers can expect promotions on everything from flowers to date night dinner packages in the coming days, leaving plenty of ideas for those looking to spoil their Valentines."

Cautious consumers do their research when it comes to shopping, and many will purchase gifts online.  The survey found that 26.1% plan to shop online this Valentine's Day, flat with last year's 26.3%.  Many will turn to their tablets or smartphones before making their final gift decisions; 24% will research products or compare prices on their smartphones and 32.25 will do so on their tablets.

The NRF's Valentine's Day spending survey was designed to gauge consumer behavior and shopping trends related to Valentine's Day.  The survey was conducted for NRF by Prosper Insights & Analytics.  The poll of 6,417 consumers was conducted from January 2-13, 2014 and has a margin of error of plus or minus 1.2 percentage points.

Source: Retailing Today

Builder Confidence In The 55+ Housing Market Ends Fourth Quarter On A Record High

February 3, 2014

Builder confidence in the 55+ housing market for the fourth quarter of 2013 is up sharply, according to the National Association of Home Builders' (NAHB) latest 55+ Housing Market Index (HMI) released today.  All segments of the market - single-family homes, condominiums and multifamily rental - registered strong increases compared to the same quarter a year ago.  The single-family index increased 20 points to a level of 48, which is the highest fourth-quarter reading since the inception of the index in 2008 and the ninth consecutive quarter of year over year improvements.

"We are seeing continued improvement in the 55+ housing market because consumers have gained confidence in the economy and are able to sell their current homes and move into a new home or an apartment that fits the lifestyle they desire," said Robert Karen, chairman of NAHB's 50+ Housing Council and managing member of the Symphony Development Group.  "We expect this optimism from builders and developers to carry on into 2014."

There are separate 55+ HMIs for two segments of the 55+ housing market: single-family homes and multifamily condominiums.  Each 55+ HMI measures builder sentiment based on a survey that asks if current sales, prospective buyer traffic and anticipated six-month sales for that market are good, fair or poor (high, average or low for traffic).  An index number below 50 indicates that more builders view conditions as poor than good.

All of the components of the 55+ single-family HMI showed significant growth from a year ago: present sales climbed 26 points to 53, expected sales for the next six months rose 24 points to 62 and traffic of prospective buyers increased 9 points to 33.

The 55+ multifamily condo HMI posted a gain of 16 points to 35, which is the highest fourth-quarter reading since the inception of the index.  All 55+ multifamily condo HMI components increased compared to a year ago.  Present sales increased 20 points to 37, expected sales for the next six months increased 15 points to 40 and traffic of prospective buyers increased 9 points to 30.

The 55+ multifamily rental indices also showed strong gains in the third quarter.  Present production increased 12 points to 43, expected future production rose 12 points to 46, current demand for existing units increased 16 points to 54 and future demend increased 16 points to 55.

"The 55+ segment of the housing market contains more discretionary purchases so as expected it has taken longer for that segment to join the housing recovery," said NAHB Chief Economist David Crowe.  "The 20 point year-over-year increase in 55+ HMI for single-family homes matches earlier gains in the NAHB/Wells Fargo HMI for the overall single-family market and surpasses the more recent gains in other housing segments."

Source: National Association of Home Builders

The Conference Board Consumer Confidence Index Increases Again

January 28, 2014

The Conference Board Consumer Confidence Index, which had rebounded in December, increased again in January.  The Index now stands at 80.7, up from 77.5 in December.  The Present Situation Index increased to 79.1 from 75.3.  The Expectations Index increased to 81.8 from 79.0 last month.

"Consumer confidence advanced in January for the second consecutive month," said Lynn Franco, Director of Economic Indicators at The Conference Board.  "Consumers' assessment of the present situation continues to improve, with both business conditions and the job market rated more favorably.  Looking ahead six months, consumers expect the economy and their earnings to improve, but were somewhat mixed regarding the outlook for jobs.  All in all, confidence appears to be back on track and rising expectations suggest the economy may pick up some momentum in the months ahead."

Consumers' assessment of overall present-day conditions continues to improve.  Those claiming business conditions are "good" increased to 21.5 percent from 20.2 percent, while those claiming business conditions are "bad" edged down to 22.8 percent from 23.2 percent.  Consumers' appraisal of the labor market was also more positive.  Those saying jobs are "plentiful" ticked up to 12.7 percent from 11.9 percent, while those saying jobs are "hard to get" decreased slightly to 32.6 percent from 32.9 percent.

Consumers' expectations, which had improved sharply in December, increased again in January.  Those expecting business conditions to improve over the next six months remained unchanged at 17.4 percent, while those anticipating business conditions to worsen decreased to 12.1 percent from 13.9 percent.  Consumers' outlook for the labor market was mixed.  Those expecting more jobs in the months ahead declined to 15.4 percent from 17.1 percent.  However, those anticipating fewer jobs decreased to 18.3 percent from 19.4 percent.  The proportion of consumers expecting their incomes to increase rose to 15.8 percent from 13.9 percent, while those anticipating a decrease in their incomes declined to 13.6 percent from 14.3 percent.

Source: The Conference Board

U.S. Consumer Confidence Rebounds in December

The Conference Board Consumer Confidence Index, which had decreased in November, rebounded in December.  The Index now stands at 78.1, up from 72.0 in November.  The Present Situation Index increased to 76.2 from 73.5.  The Expectations INdex increased to 79.4 from 71.1 last month.

"Consumer confidence rebounded in December and is now close to pre-government shutdown levels (September 2013, 80.2).  Sentiment regarding current conditions increased to a 5 1/2 year high (April 2008, 81.9), with consumers attributing the improvement to more favorable economic and labor market conditions.  Looking ahead, consumers expressed a greater degree of confidence in future economic and job prospects, but were moderately pessimistic about their earning prospects.  Despite the many challenges throughout 2013, consumers are in better spirits today than when the year began", says Lynn Franco, Director of Economic Indicators at The Conference Board.

Consumers' appraisal of overall current conditions improved.  Those claiming business conditions are "good" edged down to 19.6 percent from 20.4 percent.  Consumers' appraisal of the job market was also more upbeat.  Those saying jobs are "plentiful" ticked up to 12.2 percent from 12.0 percent, while those saying jobs are "hard to get" decreased to 32.5 percent from 34.1 percent.

Consumers' expectations, which had decreased in November, improved in December.  The percentage of consumers expecting business conditions to improve over the next six months increased to 17.2 percent from 16.7 percent, and those expecting business conditions to worsen decreased to 14.0 percent from 16.1 percent.

Consumers' outlook for the labor market was considerably more optimistic.  Those anticipating more jobs in the months ahead increased sharply to 17.1 percent from 13.1 percent, while those anticipating fewer jobs decreased to 19.0 percent from 21.4 percent.  The proportion of consumers expecting their incomes to increase declined to 13.9 percent from 15.3 percent, while those expecting a decrease in their incomes declined to 14.0 percent from 15.5 percent.

Source: December 2013 Consumer Confidence Survey, The Conference Board

Consumer Confidence Decreases Sharply in October

The Conference Board Consumer Confidence Index, which had declined moderately in September, decreased sharply in October.  The Index now stands at 71.2 (1985=100), down from 80.2 in September.  The Present Situation Index decreased to 70.7 from 73.5.  The Expectations Index fell to 71.5 from 84.7 last month.

"Consumer confidence deteriorated considerably as the federal government shutdown and debt-ceiling crisis took a particularly large toll on consumers' expectations.  Similar declines in confidence were experienced during the payroll tax hike earlier this year, the fiscal cliff discussions in late 2012, and the government shutdown in 1995/1996.  However, given the temporary nature of the current resolution, confidence is likely to remain volatile for the next several months", said Lynn Franco, Director of Economic Indicators at The Conference Board.

Consumers' assessment of current conditions declined moderately.  Those claiming business conditions are "good" decreased to 19.0 percent from 20.7 percent, however, those claiming business conditions are "bad" edged down to 23.0 percent from 23.9 percent.  Consumers' appraisal of the job market was less favorable than last month.  Those saying jobs are "plentiful" was virtually unchanged at 11.3 percent from 11.4 percent, while those saying jobs are "hard to get" increased to 35.8 percent from 33.6 percent.

Consumers' outlook for the labor market was also more pessimistic.  Those anticipating more jobs in the months ahead decreased to 15.3 percent from 16.1 percent, while those anticipating fewer jobs increased to 22.7 percent from 19.1 percent.  The proportion of consumers expecting their incomes to increase rose to 15.8 percent from 15.1 percent, however those expecting a decrease rose to 15.4 percent from 13.9 percent.

Source: October 2013 Consumer Confidence Survey, The Conference Board

July Retail Sales Rose More Than Forecast

Retail sales advanced 0.8% in July, the first gain in four months, according to a report released by the Commerce Department.  Sales were fueled by strength from the automobile sector, electronics and appliance outlets, and department stores.

The bigger than expected increase followed a 0.7% decline in June that was weaker than first reported.  Bloomberg had forecast a 0.3% rise in July.  The results have buoyed feelings overall that the economy may be improving, albeit at a moderate pace.

"We're looking for consumption to pick up," Credit Agreicole CIB chief economist Michael Carey told Bloomberg.  "There was improved consumer confidence in July plus job gains that were a little better than expected, which is certainly constructive for the household outlook."

Retail sales, which climbed the most since February, followed a quarter in which household spending grew at the slowest pace in a year.  Consumer purchases, about 70% of the economy, increased at a 1.5% annual rate from April to June.

All 13 major retail categories showed a gain last month, led by a 0.8% jump at auto dealers, a 0.9% rise at electronics and appliance outlets, and a 0.6% increase at department stores that was the most since September.

Spending increased 0.8% at clothing stores and 0.7% at general merchandise stores.  Health and personal care sales jumped 1.1%, the most since May 2011.

Industry data also showed that same-store sales at the more than 20 retailers tracked by Retail Metrics Inc. gained 4.4% in July, almost four times analysts' estimates, after only a 0.3% rise in June.

Sales excluding automobiles and service stations advanced 0.9%, the most since January.

Source:  retailingtoday.com

Consumer Confidence Index Increases After Four Consecutive Declines

The Conference Board Consumer Confidence Index, which had declined in June, improved slightly in July.  The Index now stands at 65.9 (1985=100), up from 62.7 in June.  The Expectations Index improved to 79.1 from 73.4.  The Present Situation Index, however, decreased slightly to 46.2 from 46.6 a month ago.

Says Lynn Franco, Director of Economic Indicators at The Conference Board: "Despite this month's improvement in confidence, the overall Index remains at historically low levels.  Consumers' attitude regarding current conditions was little changed in July, but their short-term expectations, which had declined last month, bounced back.  However, while consumers expressed greater optimism about short-term business and employment prospects,they have grown more pessimistic about their earnings.  Given the current economic environment - in particular the weak labor market - consumer confidence is not likely to gain any significant momentum in the coming months."

Consumers' appraisal of current conditions eased in July.  Those claiming business conditions are "good" declined to 13.8 percent from 14.2 percent, while those saying business conditions are "bad" decreased to 34.2 percent from 35.9 percent.  Consumers' assessment of the labor market was also mixed.  Those stating jobs are "hard to get" declined to 40.8 percent, while those claiming jobs are "plentiful" decreased to 7.8 percent from 8.3 percent.

On the other hand, consumers were generally more optimistic about the short-term outlook in July.  The percentage of consumers expecting business conditions to improve over the next six months rose to 18.9 percent from 16.0 percent, while those anticipating business conditions will worsen decreased to 14.6 percent from 15.8 percent.  Consumers' outlook for the labor market was also more upeat in July.  Those expecting more jobs in the months ahead increased to 17.6 percent from 14.8 percent, while those anticipating fewer jobs edged down to 20.3 percent from 20.8 percent.  The proportion of consumers expecting an increase in their incomes, however, declined to 14.2 percent from 15.3 percent.

Source: The Conference Board