Concerns about the future caused U.S. consumer confidence to decline to a nine-month low in April, increasing the likelihood that the economy could experience a recession this year.
The percentage of Americans who plan to purchase large household appliances over the next six months has dropped to its lowest level since 2011, according to the Conference Board's poll of consumer confidence, which was released on Tuesday.
Many others also did not have any plans for vacations. Due to a robust labour market, consumers have remained resilient in the face of high inflation and rising interest rates, keeping the economy afloat.
As the impacts of the Federal Reserve's fastest rate-hiking campaign since the 1980s to combat inflation start to have a wider impact, the tide may be changing. Additionally, consumers are becoming increasingly sensitive to price increases.
"Rates have been on the rise for over a year, and we're seeing the effects," said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto. "Despite a still-tight jobs market, which is still a good thing, sticky inflation does have its consequences."
The Conference Board reported that its consumer confidence index dropped from 104.0 in March to 101.3, the lowest result since July 2022. Reuters polled economists, who predicted that the index will remain at 104.0 in April.
The decline was due to worsening expectations among consumers under 55 and those making $50,000 or more annually, indicating that concerns about the economy had expanded beyond low-income households.
Even though consumers' assessments of the current state of affairs improved, their view for the near future got worse. In 13 of the last 14 months, the short-term outlook indicator has fallen below the mark indicating a recession in the next year.
Following the failure of two regional U.S. banks in March, which tightened credit conditions, the chances of a recession have increased.
The economy is also threatened by an impending battle to raise the $31.4 trillion borrowing limit for the federal government.
The percentage of consumers who said jobs were "plentiful" increased, while the percentage who said they were "hard to get" decreased. This suggests that consumers are still optimistic about the labour market.
The survey's so-called labour market differential, which is based on information on respondents' perceptions of how easy it is or is not to get a job, increased from 36.5 in March to 37.3 in April, which is consistent with a tight labour market.
The U.S. Labour Department's unemployment rate and this indicator are related. In March, the unemployment rate was 3.5%.
American stock prices were falling. Against a basket of currencies, the dollar increased. US Treasury yields decreased.
Consumers' estimates for inflation over the next year decreased from 6.3% to 6.2% last month.
The percentage of people who intend to purchase home appliances in the upcoming six months fell from 44.8 in March to 41%, the lowest percentage since September 2011. The percentage of those intending to purchase cars was the lowest it had been in nine months.
The proportion of people intending to take a holiday fell to its lowest level since last June. Fewer people planned to buy a house. However, other economists advised against making too much of the decline in purchasing plans.
"Take consumer purchase plans with a grain of salt," said Tim Quinlan, a senior economist at Wells Fargo in Charlotte, North Carolina. "This (drop in plans to take a vacation) stands in contrast to reports of record-long wait times for passport application processing and airline ticket bookings that are already close to filling up for the summer."
Plans to buy a house were likewise met with scepticism. New home sales increased 9.6% to a seasonally adjusted annual pace of 683,000 units in March, the highest level since March 2022, according to a separate report released on Tuesday by the Commerce Department.
Although they can fluctuate from month to month, new house sales are counted at the time of contract signing, making them a leading indicator of the housing market. Any decrease in mortgage rates has been used by buyers to acquire properties.
According to information provided by mortgage financing company Freddie Mac, the average rate on the well-known 30-year mortgage, which peaked at 7.03% in late 2022, was mainly lower in March.
Other statistics released on Tuesday showed that single-family home prices rose in February after seven consecutive months of losses, adding evidence to the idea that the housing market was stabilising at lower levels.
After accounting for seasonal variations, the S&P CoreLogic Case-Shiller national home price index, which includes all nine U.S. census divisions, up 0.2% month over month in February. That came after a 0.2% decline in January.
"The housing markets continue to vary across regions and price tiers, but lower mortgage rates and low inventories have been helpful in providing the floor for prices in markets where prices seemed to have nosedived following mortgage rate surge," said Selma Hepp, chief economist at CoreLogic. "Home prices nationally have bottomed out."
(Source:www.reuters.com)
The percentage of Americans who plan to purchase large household appliances over the next six months has dropped to its lowest level since 2011, according to the Conference Board's poll of consumer confidence, which was released on Tuesday.
Many others also did not have any plans for vacations. Due to a robust labour market, consumers have remained resilient in the face of high inflation and rising interest rates, keeping the economy afloat.
As the impacts of the Federal Reserve's fastest rate-hiking campaign since the 1980s to combat inflation start to have a wider impact, the tide may be changing. Additionally, consumers are becoming increasingly sensitive to price increases.
"Rates have been on the rise for over a year, and we're seeing the effects," said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto. "Despite a still-tight jobs market, which is still a good thing, sticky inflation does have its consequences."
The Conference Board reported that its consumer confidence index dropped from 104.0 in March to 101.3, the lowest result since July 2022. Reuters polled economists, who predicted that the index will remain at 104.0 in April.
The decline was due to worsening expectations among consumers under 55 and those making $50,000 or more annually, indicating that concerns about the economy had expanded beyond low-income households.
Even though consumers' assessments of the current state of affairs improved, their view for the near future got worse. In 13 of the last 14 months, the short-term outlook indicator has fallen below the mark indicating a recession in the next year.
Following the failure of two regional U.S. banks in March, which tightened credit conditions, the chances of a recession have increased.
The economy is also threatened by an impending battle to raise the $31.4 trillion borrowing limit for the federal government.
The percentage of consumers who said jobs were "plentiful" increased, while the percentage who said they were "hard to get" decreased. This suggests that consumers are still optimistic about the labour market.
The survey's so-called labour market differential, which is based on information on respondents' perceptions of how easy it is or is not to get a job, increased from 36.5 in March to 37.3 in April, which is consistent with a tight labour market.
The U.S. Labour Department's unemployment rate and this indicator are related. In March, the unemployment rate was 3.5%.
American stock prices were falling. Against a basket of currencies, the dollar increased. US Treasury yields decreased.
Consumers' estimates for inflation over the next year decreased from 6.3% to 6.2% last month.
The percentage of people who intend to purchase home appliances in the upcoming six months fell from 44.8 in March to 41%, the lowest percentage since September 2011. The percentage of those intending to purchase cars was the lowest it had been in nine months.
The proportion of people intending to take a holiday fell to its lowest level since last June. Fewer people planned to buy a house. However, other economists advised against making too much of the decline in purchasing plans.
"Take consumer purchase plans with a grain of salt," said Tim Quinlan, a senior economist at Wells Fargo in Charlotte, North Carolina. "This (drop in plans to take a vacation) stands in contrast to reports of record-long wait times for passport application processing and airline ticket bookings that are already close to filling up for the summer."
Plans to buy a house were likewise met with scepticism. New home sales increased 9.6% to a seasonally adjusted annual pace of 683,000 units in March, the highest level since March 2022, according to a separate report released on Tuesday by the Commerce Department.
Although they can fluctuate from month to month, new house sales are counted at the time of contract signing, making them a leading indicator of the housing market. Any decrease in mortgage rates has been used by buyers to acquire properties.
According to information provided by mortgage financing company Freddie Mac, the average rate on the well-known 30-year mortgage, which peaked at 7.03% in late 2022, was mainly lower in March.
Other statistics released on Tuesday showed that single-family home prices rose in February after seven consecutive months of losses, adding evidence to the idea that the housing market was stabilising at lower levels.
After accounting for seasonal variations, the S&P CoreLogic Case-Shiller national home price index, which includes all nine U.S. census divisions, up 0.2% month over month in February. That came after a 0.2% decline in January.
"The housing markets continue to vary across regions and price tiers, but lower mortgage rates and low inventories have been helpful in providing the floor for prices in markets where prices seemed to have nosedived following mortgage rate surge," said Selma Hepp, chief economist at CoreLogic. "Home prices nationally have bottomed out."
(Source:www.reuters.com)