US consumer confidence fell for a fourth straight month in November amid worries about current business conditions and employment prospects, but remained at levels sufficient to support a steady pace of consumer spending. While other data on Tuesday showed an unexpected drop in new home sales last month, data for September was revised higher to show purchases surging to their highest level in more than 12 years. The housing market, the most sensitive sector to interest rates, is catching up to the Federal Reserve’s easy monetary policy stance, which has push down mortgage rates from last year’s multi-year highs.
Though housing accounts for a fraction of gross domestic product, it has a bigger economic footprint. The rise in housing activity early in the fourth quarter suggests some support for the economy as it slows amid cooling consumer spending and persistent weakness in business investment and manufacturing. The Conference Board said its consumer confidence index slipped to a reading of 125.5 this month from an upwardly revised 126.1 in October. The index was previously reported at 125.9 in September. It has declined for four straight months.
Economists polled by Reuters had forecast the index would climb to 127.0 in November. The survey’s present situation measure, based on consumers’ assessment of current business and labor market conditions, fell to 166.9 this month from 173.5 in October. The expectations index drawn from consumers’ short-term outlook for income, business and labor market conditions rose to 97.9 from 94.5 last month. Consumer confidence has retreated from a recent peak of 137.9 in October 2018. The 16-month trade war between the United States and China, which has bruised business sentiment, leading to a drop in capital expenditure that has contributed to a downturn in manufacturing, has been mainly blamed for the slide in consumer confidence.
Still the confidence index remains relatively high. The Conference Board survey’s so-called labor market differential, derived from data on respondents’ views on whether jobs are plentiful or hard to get, fell to 32.1 in November from 36.1 in October.
That measure closely correlates to the unemployment rate in the Labor Department’s employment report. U.S. stocks were trading slightly higher while the dollar .DXY was flat against a basket of currencies. Prices of U.S. Treasuries rose. In a separate report on Tuesday, the Commerce Department said new home sales dropped 0.7% to a seasonally adjusted annual rate of 733,000 units last month, held down by decreases in activity in the South and Northeast regions.
September’s sales pace was revised higher to 738,000 units, the highest since July 2007, from the previously reported 701,000 units. Economists polled by Reuters had forecast new home sales, which account for about 11.3% of housing market sales, would increase 1.1% to a pace of 709,000 units in October. New home sales are drawn from permits and tend to be volatile on a month-to-month basis. Sales surged 31.6% from a year ago. The median new house price fell 3.5% to $316,700 in October from a year ago. Sales last month were concentrated in the $200,000-$400,000 price range. Homes priced below $200,000, the most sought after, accounted for only 9% of sales.
Reports last week showed housing starts surging and building permits vaulting to more than a 12-year high in October, and home resales advancing. Though housing accounts for a fraction of gross domestic product, it has a bigger economic footprint. But the housing market momentum could slow as mortgage rates have backed up in the last two months, partly driven by ebbing fears of a recession amid a de-escalation in trade tensions between the United States and China. The Fed last month cut rates for the third time this year and signaled a pause in the easing cycle that started in July when it reduced borrowing costs for the first time since 2008.
The 30-year fixed mortgage rate is currently at 3.66%, still below its peak of 4.94% in November 2018, according to data from mortgage finance agency Freddie Mac. Residential investment rebounded in the third quarter after contracting for six straight quarters, the longest such stretch since the 2007-2009 recession. New home sales in the South, which accounts for the bulk of transactions, fell 3.3% in October. Sales in the Northeast tumbled 18.2%. But sales increased 4.2% in the Midwest and jumped 7.1% in the Midwest. There were 322,000 new homes on the market last month, up 0.3% from September. At October’s sales pace it would take 5.3 months to clear the supply of houses on the market, up from 5.2 months in September. About two-thirds of the houses sold last month were either under construction or yet to be built.