A jump in the consumer confidence index, along with some positive results from recent housing market reports, indicate signs of strength and further improvement in the U.S. economy. This article from Reuters rounds up the highlights of some of the economic reports released this week.
U.S. consumer confidence hit a seven-month high in August and new single-family home sales rebounded in July, suggesting underlying strength in the economy that could still allow the Federal Reserve to raise interest rates this year.
Other data on Tuesday showed moderate gains in house prices in June, which should support consumer spending and keep home purchasing affordable, especially for first-time buyers.
“This is evidence of the ‘some further improvement’ in the economy that the Fed is waiting for to raise rates. They are so close, they need just a little more confirmation,” said Chris Rupkey, chief financial economist at MUFG Union Bank in New York.
The Conference Board said its consumer index jumped 10.5 points to 101.5 this month, the highest reading since January, amid optimism over the labor market. The survey, however, was conducted before a global equity markets sell-off that began last week, which has diminished the chances of a U.S. rate hike next month.
Although sentiment could retreat in September, economists said any decline was likely to be modest. A strong labor market, lower gasoline prices and an improving housing market also are seen supporting consumer confidence.
The survey’s so-called labor market differential, which closely correlates to the unemployment rate in the employment report, was the most favorable since January 2008.
In a separate report, the Commerce Department said new home sales increased 5.4 percent to a seasonally adjusted annual rate of 507,000 units. Those sales, which account for 8.3 percent of the market, were up 25.8 percent compared to July of last year.
The housing market is gaining steam, with data last week showing home resales jumped to a near 8-1/2-year high in July and groundbreaking on new home building climbing to its highest level since October 2007.
A third report showed the S&P/Case Shiller composite index of 20 metropolitan areas in June gained 5.0 percent year-over-year compared to a gain of 4.9 percent in May.
“If the pace of appreciation stabilizes around current levels, it could provide enough incentive to encourage homeowners to put their homes on the market, while encouraging potential homebuyers back into the market,” said Lewis Alexander, chief economist at Nomura in New York.
