Tuesday data: Consumer mood brightens, new home sales tumble
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TUESDAY DATA: CONSUMER MOOD BRIGHTENS, NEW HOME SALES TUMBLE
Investors witnessed an economic threesome on Tuesday, telling a story of rising pre-holiday consumer optimism amid a floundering housing market.
U.S. consumers, girding their loins as Black Friday approaches, are finding themselves in a lighter mood this month.
The Conference Board's (CB) Consumer confidence index USCONC=ECI printed at 111.7, marking a 2.1-point monthly gain and notching its highest level since January.
Economists predicted a slightly lower 111.3.
Breaking things down, survey respondents' assessment of their present situation improved by 3.5%, while their near-term expectations inched 0.4% higher.
That jump in "present situation" is good news for retailers as they gear up for the holiday shopping season just days before Black Friday.
But it's bad news for data geeks who know that a widening of the gap between the two is often a harbinger of recession.
But an improvement in job confidence helped drive the upside surprise.
"November’s increase was mainly driven by more positive consumer assessments of the present situation, particularly regarding the labor market," writes CB's Chief Economist Dana Peterson. "Compared to October, consumers were also substantially more optimistic about future job availability, which reached its highest level in almost three years."
The sales of newly constructed homes USHNS=ECI plunged by 17.3% last month to 610,000 units at a seasonally adjusted annualized rate (SAAR), according to the Commerce Department.
That's a two-year low and marks a bruising 15.9% shy of expectations and a striking reversal of September's upwardly revised 7.0% gain.
It's a story repeated in pessimistic homebuilder sentiment readings and sluggish housing starts as elevated mortgage rates weigh on affordability and demand.
Potential buyers are less likely to take the big leap in the face of uncertainty, and uncertainties were running high last month ahead of the Presidential Election.
Oh yes, there was also the matter of deadly, damaging hurricanes.
"The large fall in new home sales in October was to be expected given the disruption from hurricanes Helene and Milton, as well as the rise in mortgage rates last month," says Bradly Saunders, North America economist at Capital Economics. "While sales should rebound this month, the dampening effect of still-elevated borrowing costs" are likely to cap recovery in the new home sales (and construction) space.
Finally, in more ancient history, Case-Shiller (CS) would have us know that U.S. home price growth USSHPQ=ECI cooled a bit in September.
CS's 20-city composite showed home prices, on aggregate, rose by 0.2%, down from August's 0.3% and below analyst expectations.
Year-on-year, the decline was more dramatic coming in at 4.6%, down from 5.2% the month prior and 20 basis points cooler than consensus.
It was the lowest year-on-year reading in a year and the data was gathered during a month with saw the Federal Reserve embark on its easing phase by implementing a jumbo 50 basis point interest rate cut.
They also harken back to the halcyon days before the presidential election.
A steady recovery in the supply of houses on the market, as well as historically weak mortgage demand, are likely behind the abrupt cool-down.
"Sustained easing in interest rates eventually should be supportive of housing activity over time, and lead to a resumption of stronger house price increases," says Carl Weinberg, chief economist at High Frequency Economics. "That will not happen fast."
City-by-city, New York lead the pack, rising 7.5%. Denver brought up the rear; home prices in the Mile High city rose by a paltry 0.2% over the last year.
(Stephen Culp)
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Consumer confidence https://reut.rs/3ZmdcUK
Consumer confidence jobs https://reut.rs/3AMrk0k
New home sales https://reut.rs/4ePwXZB
Case Shiller home price growth and mortgage demand https://reut.rs/3OokQrD
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