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Consumer Confidence Stalls as Hope Falls Apart

Stefani Reynolds-Pool/Getty Images

JOHN CARNEY

25 May 20212

Consumer confidence notched down slightly in May as improved assessments of current conditions were swamped by a negative turn in expectations for later this year.

The Conference Board reported Tuesday that its consumer confidence index fell to 117.2 from April’s 117.5 reading, the highest level since February of 2020, just before the pandemic began.

The expectations component of the index, which asks consumers to look out over the next six months, unexpectedly turned sharply downward, falling to 99.1 from 107.9 in April.

The share of consumers expecting business conditions to improve over the next six months fell from 33.1 percent to 30.3 percent, while the share expecting business conditions to worsen rose from 12.1 percent to 14.8 percent.  The proportion expecting more jobs fell from 31.7 percent to 27.2 percent, while those anticipating fewer jobs rose from 14.4 percent last month to 17.3 percent.

The income side was more balanced. The share saying they expect incomes to increase fell but so did the share expecting incomes to fall.

The present situation index, based on consumers’ assessment of current business and labor market conditions, jumped to the very strong reading of 144.3 from the already elevated 131.9.

Consumers are very pleased with the current jobs market. The share saying jobs are “plentiful” jumped rom 36.3 percent to 46.8 percent. Those sayng they are hard to get fell to 12.2 from 14.7 percent.

The share saying business conditions are good fell a bit from 19.4 percent to 18.7 percent. But this was offset by a decline in those saying conditions are bad from 24.5 percent to 21.8 percent.

 

“After rebounding sharply in recent months, U.S. consumer confidence was essentially unchanged in May,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “Consumers’ assessment of present-day conditions improved, suggesting economic growth remains robust in Q2. However, consumers’ short-term optimism retreated, prompted by expectations of decelerating growth and softening labor market conditions in the months ahead. Consumers were also less upbeat this month about their income prospects—a reflection, perhaps, of both rising inflation expectations and a waning of further government support until expanded Child Tax Credit payments begin reaching parents in July.

Huge Miss: New Home Sales Crash as Prices Hit Record High

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JOHN CARNEY

25 May 202196

1:57

Sales of new homes plummeted more than expected in April.

Sales fell to a seasonally adjusted annual rate of 863,000 last month, the Commerce Department reported Tuesday. That followed a revised sales pace of 917,000 in March, down from the initially reported 1.021 million sales.

April’s figure is 5.9 percent lower than the revised March figure and 15.5 percent lower than the preliminary number. Each of the previous three months was revised lower. Despite the disappointing data, this was the best sales number for April since 2005.

Economists had expected sales to come in at an annual rate of 955,000.

The median price of a new home sold last month rose to $372,400, up from $310,100 in April 2020, a nearly 20.1 percent year-over-year gain.

On a monthly basis, the median price of a new home rose an astonishing 12.6 percent, ending three consecutive months of declines.

This is the highest median new home price ever recorded. It is also the second-fastest ever monthly gain, following October 2014’s 13.6 percent gain, and the biggest year-over-year jump since November 1987.

Adjusted for inflation, the median price is 10 percent above the March 2007 housing bubble peak.

The miss on new home sales is even more notable because mortgage rates declined in April, which tends to make homes more affordable. But record-high prices in both new and existing homes are putting them out of reach for some would-be buyers and home builders appear to be holding off on projects while labor and materials shortages push up their costs.

Soaring prices push US households to the edge

Andre Damon

12 May 2021

Surging prices for necessities like used cars, phones, and housing have caused the biggest jump in “core” consumer prices in nearly four decades, according to new figures released Wednesday by the US Department of Labor (DOL).

Rising prices for food, heating oil, gas, and other necessities are eating into workers’ incomes both in the United States and internationally.

In this April 29, 2020 file photo, a worker restocks chicken in the meat product section at a grocery store in Dallas. (AP Photo/LM Otero)

Workers are finding it increasingly impossible to make ends meet, even if they are employed full-time. The minimum wage in the United States remains at $7.25 per hour, and US President Joe Biden has reneged on his campaign promise to raise it.

Workers’ real average hourly earnings have plunged, falling 3.4 percent over the past year, according to the latest jobs report from the DOL, as companies used the pandemic as a pretext to slash wages over the past year.

Overall consumer prices increased 4.2 percent from a year earlier, the fastest pace since 2008, and significantly above economists’ expectations.

But “core” consumer prices, which exclude food and energy prices, rose 0.9 percent between April and March in the largest monthly increase since 1982.

The surge was extremely broad-based, driven by prices for used cars, air travel, housing, furniture and other consumer goods.

The biggest driver of rising overall consumer prices was rising costs for used cars, which increased by 10 percent over the past month and are up 18 percent for the year. The surge—the highest on record—is driven by the shutdown of auto assembly plants due to a shortage of raw materials, primarily microchips.

In April, the average price for a used car exceeded $25,000 for the first time in history, according to J.D. Power.

The CPI figures significantly underestimate the real price of housing, since they only take into account rent, not the price of owning or renovating a home. Over the past year, home values have shot up more than 10 percent nationwide, and in many of the zip codes, the increases are far higher.

The Wall Street Journal noted that “The median sales price for existing single-family homes was higher in the quarter compared with a year earlier for 182 of the 183 metro areas tracked by the National Association of Realtors, the group said Tuesday. In 89% of those metro areas, median prices rose by more than 10% from a year earlier.”

The increase in home values is affecting those least able to afford them. The value of homes priced under $100,000 have grown the most out of any price point over the past three years, according to an analysis by the Journal .

Lumber prices have more than doubled since the start of the year, making it impossible for many households to carry out much-needed repairs on their homes, and vastly increasing prices for new construction.

Prices are surging for nearly every commodity. The price of tin, essential to manufacturing electronics, shot up by 46 percent this year. Other raw materials, such as copper and steel used in electronics and appliances, are surging amid a mass speculation by large investors.

The run-up in food prices is driven by surging prices for staples like soybeans and corn, which have increased by more than 50 percent over the past year.

The Los Angeles Times noted that “last month, about 36% of small businesses surveyed by the National Federation of Independent Business indicated that they had raised selling prices, the highest share in 40 years.”

“Any animal that you eat is eating grains, and it’s eating corn, soybeans, or soybean meal, and perhaps even some wheat,” Sal Gilbertie, the CEO and president of Teucrium Funds, told Yahoo Finance Live. “We see the prices of these grains go as high as they’ve been literally since 2012, 2013,” he said.

Dana Peterson, the Conference Board chief economist, told Yahoo Finance Live, “While some of these price increases may fade with the pandemic, some may not.” He said the high grain prices will remain “at least a year, maybe two years.”

Periods of high inflation have previously corresponded with an intensification of the class struggle, with workers demanding higher pay to keep up with rising prices. The sensitivity of the US political establishment to these wage demands was expressed by the decision of the Democratic governor of Connecticut, Ned Lamont, to call up the National Guard to help suppress a strike by 3,400 nursing home workers set to begin Friday morning.