US Consumer Confidence Dips in July

The month of July saw Consumer confidence declined to 46.6 in July from June’s 49.3 reading. Expectations were for a smaller fall to 49. Both consumers’ perceptions of their present situation and their expectations contributed to the decline in the composite. Perceptions of their present situation declined to 23.4 from the prior month’s 25. Expectations declined to 62.0 from the 65.5 reading reported in June.

Perceptions of conditions in the labour market also deteriorated somewhat. The index of those saying jobs are “plentiful” declined to 3.6 from 4.5, while the index of those saying “jobs are hard to get” rose to 48.1 from 44.8 in June.

While consumer confidence dipped in July, it remains well above the low of 25.3 set in February of this year. Further improvement in the measure will likely come as the housing market continues to stabilize and the pace of job losses declines. Recent data on the housing market in particular has been encouraging. In addition to today’s report showing the first monthly rise in the Case-Shiller house price index in over three years, both new and existing home sales rose in June.

With the recovery still fragile, we expect the Federal Reserve to continue to support growth by maintaining the Fed Funds target in the 0.00% to 0.25% range through much of next year. We expect the combination of this monetary stimulus with fiscal stimulus to push quarterly GDP growth into positive territory over the second half of this year.

Case-Shiller house price index — In another report released earlier this morning, the Case-Shiller house price index posted a 0.5% rise in May (on a non-seasonally adjusted basis). This marked the first monthly rise in the index since May of 2006. The improvement was broad-based with only five cities of the 20 cities surveyed posting price declines. Compared with prices one-year ago, the index posed a 17.1% drop compared to the 18.1% fall reported for April.