Tag: Consumer Confidence

Mortgage Rates Hover Near 7% Pressuring Housing Market and Consumer Confidence

Posted on by slightbourne@noblecapitalmarkets.com
Key Points:
– Mortgage rates edge up — 30-year fixed rates rose to 6.89%, tracking higher Treasury yields.
– Buyer affordability hit — High rates continue to suppress home sales and affordability.
– Applications mixed — Purchase applications rose 3%, while refinance demand fell 7%.

Mortgage rates rose modestly this week, with the average 30-year fixed loan hitting 6.89%, up slightly from 6.86% the week before. The 15-year average also inched higher to 6.03%, reflecting the continued influence of Treasury yields, which have been volatile amid shifting economic signals.

The movement in mortgage rates follows recent fluctuations in the 10-year Treasury yield, a key benchmark for borrowing costs. Investors have been digesting a complex mix of developments, including the U.S. credit rating downgrade, the fiscal implications of proposed tax reforms, and evolving trade policy. While yields dipped slightly in recent days, overall borrowing costs remain elevated.

High mortgage rates continue to act as a headwind for the housing sector. According to newly released data, pending home sales dropped sharply in April, underscoring how rate-sensitive the market remains. Despite a modest weekly increase in home purchase applications, affordability challenges persist, particularly for first-time buyers and middle-income households.

This constrained environment has implications beyond real estate. A sluggish housing market can ripple through related industries—from homebuilding and furniture to construction materials and local services—potentially influencing performance in sectors that rely on consumer confidence and discretionary spending.

Although refinancing activity dropped by 7%, the slight increase in purchase applications signals that some buyers are still moving forward, especially those less sensitive to rate fluctuations or motivated by limited inventory. Nonetheless, sustained high rates may continue to delay broader recovery in housing-related demand.

In this climate, market participants are keeping a close eye on interest rate trends and consumer sentiment data, both of which remain central to shaping the economic outlook. As borrowing costs remain elevated, the pressure on housing and adjacent industries may persist—adding another layer of complexity to growth expectations in the months ahead.

April Inflation Cools, but Core Pressures and Consumer Pain Remain

Posted on by slightbourne@noblecapitalmarkets.com
Key Points:
– April’s CPI showed the slowest annual increase since February 2021, offering some relief from persistent inflation pressures.
– Core categories like shelter, medical care, and some food items continue to climb, keeping financial strain high for many consumers.
– The full effect of President Trump’s new tariffs hasn’t materialized in CPI data yet—future inflation may hinge on trade policy outcomes.

Inflation in the United States slowed in April to its lowest annual rate in over four years, offering a tentative sign of relief for policymakers and consumers alike. But under the surface, essential costs—like food, shelter, and medical care—continued to pressure household budgets, highlighting the uneven nature of disinflation in the current economic environment.

According to data released Tuesday by the Bureau of Labor Statistics, the Consumer Price Index (CPI) rose 2.3% over the previous year, down slightly from March’s 2.4%. This marks the smallest annual increase since February 2021. On a monthly basis, prices ticked up 0.2%, lower than economists’ expectations and a deceleration from previous months.

The slowdown comes amid heightened attention to President Donald Trump’s recent tariffs, which began to take effect in April. So far, their full impact has not shown up in inflation data, but analysts warn the effects may be delayed. “There isn’t a lot of evidence of tariffs boosting the CPI in April, but this shouldn’t be surprising—it takes time,” noted Oxford Economics’ Ryan Sweet.

Despite the broad deceleration in inflation, many everyday necessities remain stubbornly expensive. Shelter costs, which make up about a third of the CPI basket, rose 0.3% month-over-month and 4% from the previous year—still the largest contributor to overall inflation.

Medical care was another driver, rising 0.5% in April and 3.1% annually. Hospital services and nursing home care climbed even more sharply, up 3.6% and 4.6%, respectively. Prescription drug prices were also up, increasing 0.4% month-over-month.

Food prices presented a mixed picture. Grocery costs declined 0.4% from March, led by significant drops in prices for eggs, cereal, and hot dogs. Yet key categories such as meat and dairy remain well above year-ago levels. Ground beef prices, for instance, are 10% higher than this time last year, and steaks are up 7%.

Eating out also continues to climb in cost, with restaurant prices rising 0.4% in April and nearly 4% over the past year.

Consumer goods categories like furniture, bedding, appliances, and toys—some of which are most directly impacted by tariffs—showed modest increases in April. Furniture and bedding prices rose 1.5%, while appliances were up 0.8%.

Although tariffs were initially expected to drive prices higher more broadly, the effect may be blunted or deferred due to a 90-day pause recently announced by the White House, applying to most countries except China. A baseline 10% duty remains in place globally, leaving future pricing trends dependent on trade policy developments.

While the latest inflation report offers encouraging signs that price pressures are easing, the Federal Reserve is unlikely to pivot its interest rate policy soon. Inflation remains above the Fed’s 2% target, and “core” inflation—excluding food and energy—remained flat at 2.8% year-over-year.

For American households, modest relief at the gas pump or in the grocery aisle may be welcome, but rising healthcare and housing costs continue to erode real income gains. The road to price stability is still uncertain—and the next few months will be critical in determining whether inflation has truly turned a corner or is merely catching its breath.

Consumer Confidence Crumbles as Job Market Cools and Inflation Fears Mount

Posted on by slightbourne@noblecapitalmarkets.com
Key Points
– Consumer confidence fell to 86 in April, its lowest since early 2020.
– Job openings declined to a four-year low, with inflation expectations hitting 7%.
– Short-term economic outlook dropped sharply, signaling rising recession fears.

US consumer confidence took a sharp hit in April, falling for the fifth consecutive month and hitting its lowest level since the height of the COVID-19 pandemic. Amid growing anxieties around job security and inflation, data released Tuesday paints a sobering picture of how consumers view the economy — and their personal financial futures — under the growing shadow of President Trump’s trade escalation.

The Conference Board’s Consumer Confidence Index dropped to 86 in April from a revised 92.9 in March, falling short of economist expectations. Most striking was the steep drop in the Expectations Index, which gauges consumers’ short-term outlook for income, employment, and business conditions. It fell to 54.4 — a level not seen since 2011 and well below the recession-warning threshold of 80.

“Consumers were very much surprised by the severity of those tariffs,” said Yelena Shulyatyeva, senior U.S. economist at the Conference Board. “They actually expect tariffs to affect their finances and their jobs.”

April’s consumer survey, which overlapped with President Trump’s sweeping “Liberation Day” tariff announcement, reflects mounting public concern about how those policies will ripple through household budgets and the broader economy. Inflation expectations surged, with the average 12-month forecast rising to 7%, the highest in over two years.

Labor market sentiment, too, is souring. The share of respondents expecting fewer jobs in the next six months jumped to 32.1%, matching levels not seen since April 2009 during the Great Recession. That pessimism is echoed in the latest Job Openings and Labor Turnover Survey (JOLTS), which revealed that job openings slid to 7.19 million in March — the lowest since late 2020. While hiring held steady at 5.4 million, the ratio of openings to unemployed workers dropped, signaling reduced employer appetite for expansion.

“The hiring rate remains stuck at relatively low levels, which is usually consistent with a higher level of unemployment,” said Oxford Economics’ Nancy Vanden Houten, noting that the current pace of layoffs has artificially kept the unemployment rate in check.

Worryingly, consumer outlooks on income have also turned negative for the first time in five years. Fewer people now expect their income to grow, suggesting that inflation and employment concerns are affecting personal financial sentiment, not just macroeconomic views.

Still, perceptions of present-day conditions — such as current job availability and business activity — remain relatively stable. This disconnect between the present and future suggests a market caught between hope and unease, with near-term fears driven by rising costs and a softening labor environment.

Looking ahead, the April jobs report due Friday will offer a more detailed snapshot. Economists expect it to show a slowdown, with 133,000 jobs added and the unemployment rate holding steady at 4.2%. If confirmed, that would mark a meaningful shift from the stronger figures seen earlier this year.

For now, both consumers and economists are bracing for what may come next — from potential rate cuts to new fiscal shocks — in a climate increasingly shaped by political volatility and global economic uncertainty.

Inflation Remains Stubborn as Consumer Sentiment Hits Lowest Level Since 2022

Posted on by slightbourne@noblecapitalmarkets.com
Key Points:
– Core inflation rose 2.8% in February, exceeding expectations, while consumer spending increased 0.4%.
– Consumer sentiment dropped to its lowest level since 2022, with growing fears about the labor market.
– The Federal Reserve remains cautious on rate cuts as inflation remains above its 2% target.

The U.S. economy continues to face challenges as inflation remains higher than expected while consumer sentiment has dropped to its lowest level in more than two years. Recent data from the Commerce Department and the University of Michigan highlight ongoing concerns about rising prices, slowing consumer spending, and a weakening labor market.

The Federal Reserve’s preferred inflation measure, the core Personal Consumption Expenditures (PCE) price index, rose 0.4% in February, bringing the annual rate to 2.8%. Both figures exceeded economists’ expectations, marking the biggest monthly gain since early 2024. The broader PCE index, which includes food and energy, rose 0.3% on the month and 2.5% year-over-year, in line with forecasts. Goods prices increased 0.2%, led by recreational goods and vehicles, while services prices climbed 0.4%. Gasoline prices provided some relief, declining 0.8%.

Consumer spending increased 0.4% in February, slightly below the 0.5% forecast, despite a stronger-than-expected rise in personal income of 0.8%. While Americans are earning more, they remain cautious about their spending, with the personal savings rate rising to 4.6%, the highest level since June 2024. The stock market reacted negatively to the inflation data, with futures briefly declining as investors weighed the possibility of prolonged higher interest rates.

At the same time, consumer sentiment has weakened. The University of Michigan’s sentiment index fell to 57 in March, the lowest reading since November 2022. A key measure of consumer expectations for the economy dropped to 52.6, signaling growing uncertainty about financial conditions. Labor market concerns are increasing, with two-thirds of consumers expecting unemployment to rise in the coming year, the highest level since 2009. While February’s job report showed 151,000 jobs added and an unemployment rate of 4.1%, underlying data suggests hiring may be slowing. Indicators such as declining job postings and fewer workers voluntarily leaving jobs point to reduced confidence in the labor market.

The Federal Reserve now faces a difficult decision. After cutting rates by a full percentage point in 2024, the central bank has held off on further moves this year. Policymakers are closely monitoring inflation, particularly as President Trump’s proposed tariffs could increase costs across multiple sectors. While tariffs are generally viewed as one-time price shocks rather than ongoing inflationary forces, the scope of Trump’s trade policies and the potential for a broader trade war add uncertainty to the outlook.

For now, the Fed is likely to maintain its cautious stance, balancing inflation concerns with signs of weakening consumer confidence and labor market risks. If economic conditions deteriorate further, discussions around potential rate cuts may gain traction. However, as inflation remains above the central bank’s 2% target, policymakers are hesitant to move too quickly.

With inflation pressures persisting and consumer sentiment weakening, the economic outlook remains uncertain. Higher prices and job market concerns could weigh on consumer spending in the coming months, potentially slowing economic growth. Investors and businesses will be closely watching for signals from the Fed as it navigates a delicate balancing act between inflation control and economic

Americans’ Economic Expectations Plunge to 12-Year Low Amid Uncertainty

Posted on by slightbourne@noblecapitalmarkets.com
Key Points:
– The consumer expectations index fell to 65.2, its lowest level in 12 years, signaling rising concerns about financial stability and economic conditions.
– Inflation expectations jumped to 6.2% in March, with fewer consumers optimistic about the stock market.
– Despite declining sentiment, economists and the Federal Reserve remain cautious about whether pessimism will translate into lower spending.

Americans’ confidence in the economy has fallen to its lowest level in over a decade, reflecting heightened concerns over inflation, financial uncertainty, and the impact of President Donald Trump’s economic policies. The latest consumer confidence index from the Conference Board dropped to 92.9 in March, down from 100.1 in February, marking the lowest reading in more than four years.

More concerning is the expectations index—a measure of consumers’ outlook on income, business conditions, and employment—which plunged to 65.2, its weakest level since 2013. This marks the second consecutive month the index has remained below 80, a level historically associated with an impending recession.

The biggest driver of the decline appears to be worsening personal financial expectations. Consumers are increasingly pessimistic about their future earnings and job security, with financial situation expectations hitting their lowest level in over two years.

Inflation remains a primary concern, with consumer expectations for price increases rising to 6.2% in March from 5.8% in February. This shift suggests that Americans anticipate higher costs for everyday goods and services in the months ahead.

At the same time, consumer optimism about the stock market has deteriorated. For the first time since 2023, more Americans expect stocks to decline rather than rise, with only 37.4% of respondents predicting market gains over the next year. This shift in sentiment could indicate broader concerns about economic volatility and the impact of recent policies on financial markets.

While these fears weigh on economic confidence, the labor market remains a bright spot. Among the five components of consumer confidence measured in the survey, only current job market conditions showed improvement in March. This suggests that while Americans are worried about inflation and market stability, they are not yet seeing widespread job losses.

While consumer sentiment is declining, the critical question remains: Will this pessimism lead to reduced spending and a slowdown in economic growth? So far, Federal Reserve officials and economists are unsure.

Fed Chair Jerome Powell acknowledged the disconnect between consumer surveys and actual economic behavior, noting that while people express concern about the economy, they often continue spending on major purchases like cars and homes. “The relationship between survey data and actual economic activity hasn’t been very tight,” Powell said in a recent press conference.

Economists at Morgan Stanley have also downplayed fears of an imminent recession, arguing that consumer spending remains resilient. While retail sales dipped in January, they rebounded in February, casting doubt on the notion that a major downturn is underway.

If consumer confidence continues to decline, it could eventually translate into lower spending, which would have significant implications for businesses and economic growth. However, for now, the broader economic data suggests that while uncertainty is high, the economy remains relatively stable. The coming months will be crucial in determining whether Americans’ pessimism is justified or if the economy can weather the storm.

US Goods Trade Deficit Hits 2.5-Year High Amid Import Surge

Posted on by slightbourne@noblecapitalmarkets.com
Key Points:
– Goods trade deficit rose by 14.9% to $108.2 billion, the highest in over two years.
– Goods imports increased by 3.8%, reflecting a rise in consumer and capital goods.
– Inventory growth in retail, especially for motor vehicles, is likely to cushion GDP impact.

The U.S. goods trade deficit soared in September to its highest level since March 2022, reaching $108.2 billion. This rise, primarily driven by a 3.8% jump in imports, underscores strong consumer demand but has led some economists to scale back their growth projections for the third quarter. Released by the Commerce Department, the deficit reflects the challenges of balancing robust domestic consumption with slowing exports, which declined by 2%.

Economists noted that while a larger trade deficit traditionally weighs down gross domestic product (GDP), this impact may be mitigated by increased retail inventories, particularly in motor vehicles. Consumer spending remains strong, anticipated to be a major driver of growth for the third quarter. Yet, the trade data has led analysts to revise their economic forecasts downward, with some now expecting annualized GDP growth to hit 2.7% rather than the initially forecasted 3.2%.

Imports of consumer goods led the surge, climbing by 5.8%, while food imports saw a 4.6% boost. The demand for capital goods also rose, with businesses stocking up on equipment and industrial supplies, including petroleum and automotive parts. Analysts suggest that businesses were also building up inventories in anticipation of potential supply disruptions, such as the recently resolved dockworkers strike.

Although the high import figures signal economic strength, the dip in exports of consumer goods, industrial supplies, and capital goods points to potential headwinds for U.S. trade competitiveness. The export decline in consumer goods, down by 6.3%, indicates that external demand may be softening, potentially challenging U.S. exporters.

Meanwhile, both wholesale and retail inventories saw shifts in September. Wholesale inventories slipped slightly by 0.1%, while retail inventories rose 0.8%, reflecting sustained consumer demand. Motor vehicle and parts inventories surged by 2.1%, while non-automotive retail inventories grew modestly. Rising inventories support GDP growth, though they also suggest that retailers may have overestimated sales for the period.

Economists are closely watching inventory levels as they provide insight into whether consumer demand can match the increased supply. According to Carl Weinberg, chief economist at High Frequency Economics, an unexpected rise in retail inventories could signal a slowdown in consumer demand but could still provide short-term GDP support.

The recent trade data arrives ahead of Wednesday’s anticipated GDP report, which is expected to provide a clearer picture of the U.S. economy’s trajectory. While strong consumer demand is evident, analysts remain cautious, noting that the elevated goods trade deficit may continue to be a drag on economic growth in the near term.

Persistent Price Pressures Erode Consumer Confidence

Posted on by slightbourne@noblecapitalmarkets.com

The latest consumer confidence readings paint a picture of an increasingly pessimistic American consumer, battered by stubborn inflation and growing concerns over the economic outlook. The plunge in sentiment comes at a pivotal time for the Federal Reserve as it grapples with getting price rises under control without sending the economy into a recession.

The Conference Board’s consumer confidence index fell to 97 in April, down sharply from 103.1 in March and marking the lowest level since the souring moods of summer 2022. The dismal April print missed economist estimates of 104 as elevated price pressures, especially for essentials like food and gasoline, weighed heavily on household psyches.

Perhaps more worrying for the economic outlook, consumers also grew markedly more downbeat about the trajectory for business conditions, job availability, and income prospects over the next six months. The expectations index plummeted to levels not seen since last July, with the survey’s written responses making clear that persistent inflation is taking a major toll.

“Elevated price levels, especially for food and gas, dominated consumers’ concerns, with politics and global conflicts as distant runners-up,” according to the Conference Board’s analysis. Consumers earning under $50,000 a year have remained relatively steady in their confidence, while middle- and higher-income households have seen sharper declines.

The gloomy outlook on the economy’s path comes as recent data has offered a mixed bag. Inflation has remained stubbornly high, defying the Fed’s projections for a steady decline. The core Personal Consumption Expenditures (PCE) price index, which strips out volatile food and energy costs and is the Fed’s primary inflation gauge, rose 2.8% over the past year in March.

Not only did that overshoot estimates, but core PCE accelerated to a concerning 4.4% annualized pace in the first quarter. This has cast doubt on the Fed’s ability to wrestle inflation back down to its 2% target in a timely manner using just rate hikes alone.

Fed Chair Jerome Powell acknowledged as much in April, stating “The recent data have clearly not given us greater confidence and instead indicate that it’s likely to take longer than expected to achieve that confidence” that inflation is sustainably moving back to 2%.

This means the Fed’s fight against inflation is likely to grind on for longer, with interest rates projected to remain elevated well into 2024 and potentially longer. The federal funds rate currently sits in a range of 5-5.25% after over a year of aggressive rate hikes by the central bank.

While higher borrowing costs have slowed some sectors like housing and manufacturing, the impacts on services inflation and consumer prices have lagged. Consequently, the risk of overtightening by the Fed and precipitating a recession rises with each stubbornly high inflation print.

Complicating the outlook, first quarter GDP growth came in at a sluggish 1.6% annualized pace, missing estimates of 2.5% expansion. The deceleration from 3.4% growth in Q4 has sparked fears that excessive Fed tightening is already dragging on the economy.

This weakening backdrop is likely amplifying consumer unease over the potential for job losses and income hits, sapping the willingness to spend freely. While household balance sheets remain solid overall from the pandemic recovery, the renewed bout of pessimism bears close watching as consumer spending accounts for over two-thirds of economic activity.

The Fed now faces a tricky challenge in quelling the inflation psychology that has taken hold without crashing growth entirely. Restoring price stability will require keeping monetary conditions tight for some time and accepting the economic pain that entails. But if consumer spirits remain depressed for too long, the subsequent pullback in spending could exacerbate any potential downturn. Threading that needle will be one of the central bank’s toughest tasks this year.

Consumer Confidence Jumps to Five-Month High, Signaling Economic Optimism

Posted on by slightbourne@noblecapitalmarkets.com

U.S. consumer confidence increased substantially in December to reach its highest level in five months, according to new data from the Conference Board. The confidence index now stands at 110.7, up sharply from 101.0 in November. This surge in optimism indicates consumers have a brighter economic outlook heading into 2024.

The gains in confidence were broad-based, occurring across all age groups and household income levels. In particular, confidence rose sharply among 35-54 year olds as well as those earning $125,000 per year or more. Consumers grew more upbeat about both current conditions and their short-term expectations for business, jobs, and income growth.

The large improvement in consumer spirits is likely the result of several positive economic developments in recent months. Stock markets have rebounded, mortgage rates have retreated from their peaks, and gas prices have declined significantly. Many shoppers also appear to be returning to more normal holiday spending after two years of pandemic-distorted patterns.

Labor Market Resilience Boosts Spending Power

Driving much of this economic optimism is the continued resilience in the labor market. The survey’s measure of jobs plentiful versus hard to get widened substantially in December. This correlates with the 3.7% unemployment rate, which remains near a 50-year low. Robust hiring conditions and rising wages are supporting the consumer spending that makes up 70% of GDP.

With inflationary pressures also showing signs of cooling from 40-year highs, households have more spending power heading into 2023. Consumers indicated plans to increase purchases of vehicles, major appliances, and vacations over the next six months. This points to solid ongoing support for economic growth.

Fed Rate Hikes Could Be Nearing an End

Another factor buoying consumer sentiment is growing expectations that the Fed may pause its rapid interest rate hikes soon. After a cumulative 4.25 percentage points of tightening already delivered, markets are betting on a peak rate below 5% in early 2024.

This prospect of nearing an end to historically-aggressive Fed policy has sparked a powerful rally in rate-sensitive assets like bonds and stocks while boosting housing affordability. With inflation expectations among consumers also falling to the lowest since October 2020, pressure on the central bank to maintain its torrid tightening pace is declining.

Housing Market Poised for Rebound

One key area that could see a revival from lower rates is the housing sector. Existing home sales managed to eke out a small 0.8% gain in November following five straight months of declines. While higher mortgage rates earlier this year crushed housing affordability, the recent rate relief triggered a jump in homebuyer demand.

More consumers reported plans to purchase a home over the next six months than any time since August. However, extremely tight inventory continues hampering sales. There were just 1.13 million homes for sale last month, 60% below pre-pandemic levels. This lack of supply will likely drive further home price appreciation into 2024.

The median existing-home price rose 4% from last year to $387,600 in November. But lower mortgage rates could bring more sellers and buyers to the market. Citigroup economists project stronger price growth next spring and summer as rates have room to decrease further. This would provide a boost to household wealth and consumer spending power.

Economic Growth Appears Solid Entering 2024

Overall, with consumers opening their wallets and the job market thriving, most economists expect the US to avoid a downturn next year. The sharp rise in confidence, spending intentions, and housing market activity all point to continued economic growth in early 2024.

Inflation and Fed policy remain wildcards. But the latest data indicates the price surge has passed its peak. If this trend continues alongside avoiding a spike in unemployment, consumers look primed to keep leading GDP forward. Their renewed optimism signals economic momentum instead of approaching recession as 2024 gets underway.