U.S. Consumer Confidence Jumps in April; Home Prices Rise Sharply in February


 
Author: RBC Financial Group Economics Department
Location: Toronto
Date: 2013-05-01

  • US consumer confidence jumped 6.2 points to a five-month high of 68.1 in April 2013 from a reading of 61.9 in March. Market expectations were for an April reading of 61.0.
  • Despite the improved headline, the current employment differential deteriorated to -27.3 from -25.9 in March because consumers became more pessimistic about labour market conditions.
  • The improvement in consumer confidence in April was encouraging and suggested that the slight upward trend in consumer spending seen in the first quarter of 2013 (as reported in Friday’s advance first-quarter 2013 GDP release) may carry into the second quarter. With that said, some of the strength in consumer spending was weather related (increased spending on utilities due to colder than normal temperatures in March), and we expect some retracement in April. Moreover, the dour view of labour market conditions combined with the effect of the fiscal measures implemented in the first three months of the year (namely the payroll tax increase and the forced government spending cuts) suggest that households may show more restraint in the near term. As a result, we expect that consumer spending growth will moderate in the second quarter of 2013 to closer to 2% compared to the fairly robust 3.2% annualized pace of growth recorded in the first quarter.
  • In a separate release this morning, the seasonally adjusted S&P/Case-Shiller 20-City Composite measure of US home prices rose 1.2% in February 2013. The annual pace of increase in the unadjusted index picked up to 9.3% from 8.1% in the previous month.

 

The Conference Board’s measure of US consumer confidence jumped to a five-month high of 68.1 in April, well above expectations for a 61.0 reading, from an upwardly revised 61.9 level in March (initially reported as 59.7). The improvement in April reflected more optimistic appraisals of both present conditions and the short-term outlook. The “expectations for six months hence” component surged by 9.6 points to 73.3, which is its best reading since November, while the “present situation” component rose by a modest 1.2 points to 60.4.

With respect to labour market conditions, those saying jobs were “plentiful” rose to 9.8% in April from 9.5% in March while those saying jobs were “hard to get” rose to 37.1% from 35.4% in the previous month. The net result was that the labour market differential (the difference between these two components) deteriorated to a three-month low of -27.3 in April from -25.9 in the previous month.

The improvement in consumer confidence in April was encouraging and suggested that the slight upward trend in consumer spending seen in the first quarter of 2013 (as reported in Friday’s advance first-quarter 2013 GDP release) may carry into the second quarter. With that said, some of the strength in consumer spending was weather related (increased spending on utilities due to colder than normal temperatures in March), and we expect some retracement in April. Moreover, the dour view of labour market conditions combined with the effect of the fiscal measures implemented in the first three months of the year (namely the payroll tax increase and the forced government spending cuts) suggest that households may show more restraint in the near term. As a result, we expect that consumer spending growth will moderate in the second quarter of 2013 to closer to 2% compared to the fairly robust 3.2% annualized pace of growth recorded in the first quarter.

In a separate release this morning, the seasonally adjusted S&P/Case-Shiller 20-City Composite measure of US home prices rose 1.2% on a month-over-month basis in February 2013, thereby beating market expectations for a modest 0.9% gain. The measure has now increased in 13 consecutive months and sits at its highest level since December 2008. The unadjusted index rose 9.3% on a year-over-year basis in February, which was a faster annual pace of growth than the 8.1% gain in the previous month and the highest rate of increase since May 2006.

Information contained in this report has been prepared by the Economics Department of RBC Financial Group based on information obtained from sources considered to be reliable. While every effort has been made to ensure accuracy and completeness, RBC Financial Group makes no such representation or warranty, express or implied. This report is for information purposes only and does not constitute an offer to sell or a solicitation to buy securities.

 

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